House prices continue to fall

The average cost of a home in the UK dropped by a further 0.5% during the month to £179,358, meaning homes have lost around 2.3% of their value since November, according to Nationwide Building Society.

At the same time annual house price inflation continued its downward trend, easing to just 2.7%, its lowest level since November 2005.

But on a brighter note, the seven month run of falls in the number of mortgages approved for house purchase came to an end.

A total of 74,000 new mortgages were approved for people buying a new home during January, up from 72,000 in December, according to Bank of England figures.

Despite the rise, however, the number was still the second lowest since September 1995, and about 40% below the 121,000 mortgages for home movers arranged in January 2007.

The increase also does not signal the end to the housing market slow down, as approvals take time to feed through into house prices, and there could still be further falls to come in the number of new mortgages arranged.

Nationwide said the softening in house prices during February was not unexpected given the falls in demand that have been seen recently.

The group said reluctance on the part of buyers to enter the market was not surprising given the current uncertainties, and it was unlikely that activity would return to trend levels for some time.

Vicky Redwood, an economist at Capital Economics, said: "January's household borrowing figures suggest that housing market activity has stabilised, at least temporarily. However, the previous drops have not yet had their full impact on house prices."