The average UK house price declined by 1,9% in March says Halifax, making house prices in the first quarter of 2009 2.7% lower than the previous quarter which is smaller than the 5-6% falls recorded in previous quarters.

Completed sales halved between 2007 and 2008, but there are signs that activity is beginning to stabilise, said the lender, with the number of mortgages approved the highest since May 2008.

Chief Economist at Halifax Martin Ellis said he expects housing market conditions to remain tough for the rest of the year despite improvements in affordability and downward pressure will continue to come from increasing unemployment and low consumer confidence.

Seema Shah from Capital Economics said that the housing market correction still has further to go: ‘Admittedly, mortgage approvals data, reported earlier this week, suggest that the rate of house price decline may be approaching its trough. But even if the average rate of decline does not get any worse than that recorded in February and March, house prices would still be 30% below their peak as early as August.

‘There are, of course, some glimmers of hope. Yesterday’s Bank of England Credit Conditions Survey suggested that lending criteria may be relaxed in the coming months. However, with the survey also showing that lenders expect the demand for mortgages to remain weak, any improvement in housing market activity is unlikely to be significant. And while recent economic data suggest that the worst may be behind us, it will still be some time before the economy starts growing again.’

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