House prices dropped by 2.3% in February and were 17.7% lower on an annual basis, according to the Halifax monthly housing index.

The drop last month more than offset January's meagre 2.0% increase, and prices in the three months to February were 3.6% lower compared to the previous three months.

This is just below the quarterly rate of decline of 5-6% recorded consistently between June 2008 and January 2009. Equally, prices in February were 17.7% lower on an annual basis.

Martin Ellis, Halifax housing economist, said: ‘Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio – a key measure of housing affordability – has fallen to its lowest level for six years.

Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage.’