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Halifax housing data dashes hopes of recovery

Lender Halifax fuelled fears of a turn for the worse in the property market as it reported the third monthly fall in a row for house prices in September.

The 0.4 per cent decline it recorded matches the drop in prices seen in the Nationwide building society's index this week. According to Halifax, the price of the typical house fell to £159,486 in September, representing a 1.2 per cent fall on a year ago.

In real terms, the extent of the decline is even greater because the index does not adjust for inflation. The Bank of England's slashing of interest rates to 0.5 per cent has maintained an uneasy equilibrium in the housing market so far. The resulting fall in mortgage costs have allowed more people to hang on to their homes than in previous recessions, while the big deposits demanded by lenders have drastically limited the pool of new buyers and supported property prices.

According to the Bank's latest credit conditions survey, the £80bn Funding for Lending scheme is expected to fuel a big rise in mortgage lending in the final three months of the year, although nerves about a worsening jobs market could also deter would-be buyers.

Capital Economics property economist Matthew Pointon said: "The expected softening in the labour market will only bear down further on already fragile consumer confidence." He added: "We doubt [the FLS] will herald the start of a housing-market revival."

Halifax highlighted HM Revenue and Customs figures which showed recent home sales have remained stable, at between 75,000 and 77,000 per month between May and August. But this is barely half the level seen before the credit crunch.

IHS Global Insight's Howard Archer predicted: "We expect house prices to fall by around 3 per cent from current levels in the face of limited market activity and fragile consumer confidence."

Halifax's figures come two days after a survey by Nationwide also found that house prices fell by 0.4 per cent in September.