The Halifax maintains that the weakening in house prices is largely in response to a general easing in economic growth, deteriorating employment prospects and the knock to confidence following September's terrorist attacks in America.
Commenting on the figures Martin Ellis, Halifax group economist, said: 'While this was the first monthly fall in 2001, it was smaller than the decline recorded in October last year. As a result, the annual rate of house price inflation increased.
'House price movements over the past few months as a whole indicate a clear downward shift in the underlying trend, with prices increasing at a somewhat slower pace compared with earlier in the year. This is consistent with reports from estate agents and house-builders and the latest market figures on the number of mortgage approvals, which all show signs of a slowdown in housing market activity.'
According to the Halifax, this weakening in the housing market is largely in response to the general easing in the pace of economic activity this year, with the softening in consumer confidence since the summer and the recent fall in employment likely to have been particularly important factors. A knock to confidence in the immediate aftermath of September's terrorist attacks in America may also have contributed to last month's small fall in prices.
But Ellis said the downturn could be short-lived. 'Looking ahead, continuing economic growth, low interest rates and housing affordability levels that are not stretched should support the housing market. We expect house prices to continue rising over the coming 12 months, albeit at a more modest pace,' he forecast.
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