House prices in the UK have continued to fall, according to the latest House Price Index from the Halifax.
The average price of a property declined by 1.7 per cent in July, finds the research. However, while a dramatic fall in itself, the monthly rate of decline appears to be slowing down from the 1.9 per cent recorded in June and 2.5 per cent in May.
On an annual basis the average property price across the country has fallen by 8.8 per cent in the year to July.
However, despite the recent moderation in prices, a home in the UK still costs £177,351 - £44,980 more than in July 2003, when the average price was £132,371.
"Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market," said Halifax economist Suren Thiru.
"This is resulting in both lower prices and activity levels," she added.
In the medium term, however, Halifax remains unconcerned over the future direction of property prices.
"A solid labour market, low interest rates and a shortage of new houses continue to support the market," added Mr Thiru.
"The labour market is the key driver of the housing market and the number of people in employment is at a record high."
The number of people in employment increased by 61,000 over the three months to May compared with the previous quarter and by 413,000 over the past year to a record 29.59 million, according to Office for National Statistics research.
Yet, there was some good news for mortgage borrowers.
The average mortgage rate paid by all borrowers - i.e. the average rate on outstanding mortgage loans - fell by 21 basis points during the first half of 2008 from 5.97 per cent in December 2007 to 5.76 per cent in June 2008.
This decline happened despite a rise in the average mortgage rate paid by new borrowers from 5.77 per cent in April to 5.91 per cent in June as many existing borrowers benefited from the effects of the reductions in the Bank of England's key rate.
"Elevated affordability pressures on potential house buyers stem from high house prices, modest disposable income growth and the squeeze on purchasing power coming from soaring utility bills and high food prices, while very tight credit conditions have led to markedly fewer and more expensive mortgages being available," added Howard Archer, economist with analysts Global Insight.
Following the release of the research Halifax confirmed its expectation for the Bank's monetary policy committee (MPC) to maintain rates at five per cent when its latest decision is announced at midday today.