The average UK house price is now £161,743 a fall of 2.6% from the previous year as measured by the three months to August.
The index also reported that house prices in the three months to August were 1.0% higher than in the preceding three months.
Figures from the Bank of England show that the industry-wide number of mortgages approved to finance house purchase, increased for the third successive month in July, to 48,200 on a seasonally adjusted basis.
Approvals were 2.5% higher than a year earlier. Despite rising to the highest level since May 2010, the number remains within the range of 45,000 to 50,000 per month where it has been since the beginning of 2010.
Martin Ellis, housing economist at Halifax, said: “The underlying trend, as measured by the latest three months compared with the preceding three months, showed a modest improvement in house prices for the second consecutive month in August.
“A recent decline in average mortgage rates has further boosted home affordability for those able to raise a deposit to make a new purchase.
“Low interest rates are likely to continue to support the market whilst increased uncertainty about the economic outlook and pressures on householders' finances constrain.”
Nicholas Ayre, director of Home Fusion, added: “August was a catastrophic month for the global and UK economy and it may well have turned a flat UK property market into one that is falling.
“Although the Halifax rightly points to low sales volumes skewing the data, the relentless flow of grim economic news is taking its toll on prospective buyers.”
Ayre said that a double dip in the economy was becoming more and more real and that if the economy were to go down, the property market would go down with it.
“The low interest rate environment, competitive mortgage finance at higher loan to values and the low supply of housing are providing a degree of support to prices, but there is no guarantee they will withstand the weight of economic collapse,” Ayre added.
“As ever, certain areas of the UK, specifically London, are proving more resilient to house price falls.”
Paul Diggle, property economist at Capital Economics, said: “Looking ahead, the short-term balance of supply and demand in the housing market points to a further weakening in house prices to come.
“More generally, recent economic news indicates that the risks around the house price outlook still lie very much to the downside.
“If house prices continue falling at today’s pace for the rest of the year, our current expectation of a 5% fall over 2011 as a whole would be delivered, on this measure at least.”
