House prices drop 0.6% in September

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The fall, the biggest drop since last December, helped pull annual house price inflation down to 10.7%, its lowest level since May, according to Britain's biggest mortgage lender Halifax.

But the group played down the decline in prices, saying a mixed pattern of monthly price rises and price falls is a typical feature of a more subdued market.

It added that there is no concrete evidence that the global credit crunch is having an impact on the housing market, although it said it is still early days.

The easing in house prices meant the average cost of a home in the UK continued to hover just below the £200,000 mark at £198,500.

Halifax said house prices had been showing a continuing steady downward trend since the end of 2006, with prices rising by just 0.9% during the third quarter of the year, down from a gain of 2.3% in the second quarter and 3% during the first three months of 2007.

It added that it expected the annual rate of growth to decline further during the coming months as strong monthly house price gains seen during the autumn of last year dropped out of the figures.

Martin Ellis, Halifax chief economist, said: "September's price fall is consistent with the normal behaviour of the market during a slow down.

"When the market does slowdown it is usual to see a mixed picture of marginal falls and marginal rises, it's similar to 2005."

But he is not expecting there to be a widespread drop in house prices. He said: "The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale will continue to support house prices."