House prices bounced back over September, rising by 1.4% following the 0.6% fall in August, the Halifax has reported.

According to the mortgage lender, whose figures take seasonal trends into account, the average UK property price now stands at £162,911.

Halifax’s figures show that, in spite of September’s rise, the 2.7% increase in prices over the whole of the third quarter of 2004 was still less than half of the 6.1% gain over the second quarter indicating that the market is still slowing.

Sales numbers are also falling, with Halifax Estate Agents recording that the number of sales agreed in the third quarter of 2004 was a third lower than the sales recorded in the same period of 2003.

Prices in the North are rapidly catching up with those in the rest of the country, says the Halifax. The differential between prices in the north and the south is at its lowest level for nearly six years, and over the past year price growth in the north and in Wales, at 37% and 38% respectively, has been more than three times as strong as the 11% growth recorded southeast.

However, Martin Ellis, Halifax’s Chief Economist believes the northern market is vulnerable: ‘Whilst prices continue to rise more rapidly in the north, there are now signs that house price inflation in this part of the country is also slowing. We expect this trend to continue over the coming months, with prices slowing most markedly in the north, contributing to lower UK house price inflation,’ said Mr Ellis.

While the market remains underpinned by a strong labour market, affordable mortgages and a housing shortage, the Halifax maintains that the worst effects of the recent interest rate rises are yet to be felt, and therefore predicts more house price rises, but at a slower rate than in the recent past.