House prices in the UK fell by 1.2% in August, bringing an end to three consecutive months in which property values increased.
With low sales creating a volatile housing market, prices dropped by 1.2% last month, taking the average price of a home to £161,743, figures from Halifax show.
On an annual basis, property values have declined by 2.6% - as was the case in July.
But the quarterly change – considered a more reliable indicator of price trends – shows that prices increased by 1.0% from June to August.
Martin Ellis, housing economist, said that low interest rates are likely to support the market whilst the uncertain economic climate will continue to constrain demand.
"Overall, we expect broad stability in both prices and activity over the coming months," he added.
While would-be buyers continue to struggle to raise the necessary deposit to buy a home, those who manage to get a footing on the property ladder are benefiting from low mortgage rates.
The average mortgage rate for a new borrower fell from 3.84% in June to 3.68% in July, further improving affordability for those able to raise the sufficient equity to purchase a property.
The more than two percentage points decline in mortgage rates since mid 2007 has reduced typical mortgage payments for a new borrower from a peak of 48% of disposable earnings to just 28% in July 2011.
It means that homeowners are paying significantly less than the 25 year average of 37% of their disposable earnings on mortgage payments, and the lowest level since 1999.
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