Halifax  has announced that house prices fell by another 2.2% in October, increasing the drop to 13.7% over the past year.

The new figures suggest that the average UK home sits at just £168,176, close to £30,000 less than this time last year, pushing prices back to levels seen in October 2005.

Halifax said conditions in the market remained challenging due to economic conditions and the shortage of mortgages.

Their latest survey of house prices closely reflects that of Nationwide building society, which said last week that prices had fallen by 14.6% over the last year.

This figure can be misrepresented as the data fluctuates each month. A more realistic figure can be obtained by averaging the price for the past three months, and doing the same for the 3 months last year, which produces its current estimate of a 13.7% annual fall.

The lender's chief economist, Martin Ellis, said that despite the continuing falls in house prices there were signs that the market was starting to ease and that homes were now becoming more affordable.

"The house price to average earnings ratio has fallen below 5.0 for the first time for four and a half years. We expect a further improvement in the ratio over the coming months. The number of mortgages approved to finance house purchase was broadly unchanged in September for a third successive month," he said.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, had a different view.

"Prices are now falling at a faster pace than in the recession of the early 90s and, with mortgage finance still in short supply, the likelihood is that the picture will continue to deteriorate in the near term.

“Interest rate cuts by the Bank of England should gradually provide some support but the key issue is the extent to which these reductions are passed on to High Street lending rates. Ominously some lenders are taking advantage of the current environment to rebuild margins, which will inevitably lessen the beneficial impact of the bank's actions," he said.

If the Bank of England announces a significant cut to its Bank Rate today, mortgage costs are expected to be reduced.

However, the main hurdle people are now facing when taking out mortgages is not necessarily the cost of paying it back, but the significant increased in deposits required by the majority lenders.

Since the finance sector began showing signs of weakness, lenders have become more selective on those they lend to, preferring to lend to borrowers that have substantial equity in their homes or fist time buyers who are able to put down large deposits.

The Bank of England recently reported that banks and building societies will be adding further restrictions on their lending in months to come.