House prices fell by 2.6% in November, bringing the average price down to July 2005 levels.

Prices for the month were 14.9% down on an annual basis, yet Halifax said the housing makret shows signs of stabilising 'albeit at a low level.'

Martin Ellis, Halifax chief economist, said: ‘There was a 2.6% decline in average UK house prices in November. The combination of high house prices in relation to earnings, constraints on householders' incomes and spending power and the decline in the availability of mortgage finance since the summer of 2007 has curbed housing demand. These factors are major contributors to lower house prices and activity.

‘Lower house prices, however, mean that a key housing affordability measure – the house price to earnings ratio - is at its most favourable for over five years at 4.56. There are also signs that the pressures on incomes may be beginning to ease. Retail price inflation has started to decline and is likely to fall significantly over the coming months, helped by lower energy prices and weaker food price rises.’

Other key facts from Halifax’s report:

• House price to earnings ratio – a key affordability measure - is declining significantly. The house price to average earnings ratio has fallen from a peak of 5.84 in July 2007 to an estimated 4.56 in November 2008. The ratio is at its lowest level for more than five years (July 2003: 4.54). The long-term average is 4.0.

• The UK average house price is 124% higher than 10 years ago. The current average price is more than £90,000 higher than in November 1998 (£73,129).

• Housing market activity shows signs of stabilising albeit at a low level. The number of mortgages approved to finance house purchase was broadly unchanged for the fourth successive month in October at a seasonally adjusted 32,000. The recent flattening off in approvals suggests that housing market activity may be stabilising.