Average house prices dropped by 2.3% in February according to new figures by Britain’s biggest mortgage lender, Halifax.
The slide, which more than wiped out the 2% rise in January, left the average home in the UK costing £160,327.
It also helped to push up the annual rate at which prices are falling to a new high of 17.7% – based on the group’s preferred measure of comparing prices during the previous three months with the same period a year earlier.
January rise was unexpected
Economists had cautioned against reading too much into the surprise 2% rise Halifax reported for January.
Today’s figures are in line with ones reported by Nationwide for February, which showed prices dropping by 1.8%, while the annual rate of decline increased to 17.6%.
Howard Archer, chief UK and European economist at IHS Global Insight, said: ‘The very sharp 2.3% month-on-month fall in house prices in February reported by the Halifax confirms that the unexpected 2% rise in January was an anomaly and house prices remain very much on a downward track.’
House prices have now fallen back to a level last seen in August 2004 though Halifax insisted there are some ‘tentative signs’ that housing market activity was beginning to stabilise.
It added that price falls of 3.6% during the three months to the end of February, were a slight improvement on drops of between 5% and 6% that have consistently been recorded for three-month periods between June last year and January this year.
The house-price-to-earnings ratio, a key measure of affordability, fell to its lowest level for six years in February to 4.42.
This is 24% lower than when the ratio peaked at 5.84 in July 2007, although it still remains above the long-term average of 4.
The latest figures come as the Bank of England announce another 0.5% reduction in the base rate, reducing it to a new 315-year low of 0.5%.
It is also expected to vote to begin ‘quantitative easing’ meaning it will buy up more financial assets which will allow it to increase the supply of money in a bid to pull the UK out of recession.
Rate cut unlikely to help
But it is doubtful that a further interest rate cut will have much impact on the housing market.
The majority of lenders did not pass on February’s cut to their standard variable-rate borrowers, and new mortgage rates have not fallen in line with the recent base rate reductions.
There are also fears that another cut will discourage savers, who have already seen the returns paid on deposit accounts fall to record lows, from holding money with banks and building societies.
This would further reduce the supply of funds that groups have for lending, intensifying the mortgage drought.
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