The closely watched index from the Lloyds Banking Group-owned lender showed house prices rose 1.8 per cent in October which helped to partially reverse the 3.7 per cent decline from the previous month.
But the quarterly decline in house prices is still the sharpest fall since the middle of last year.
The drop is not as steep a decline as some previous falls seen over the last two years, however, which were sometimes as much as five per cent during the height of the economic downturn wiping around 25 per cent off property prices in just one year before recovering.
House prices were also only 1.2 per cent higher than a year ago, down from an annualised rise of seven per cent back in May.
“An increase in the number of properties for sale in recent months, together with a decline in demand has put some downward pressure on prices,” Martin Ellis, Halifax’s chief economist, said.
“We do not believe that prices are set to fall sharply over a sustained period. Interest rates are likely to remain very low for an extended period, which will continue to support the improved mortgage affordability position for homeowners.”
However, Howard Archer, economist at IHS Global Insight said he expected further falls in house prices over the next twelve months predicting they could decline by as much as ten per cent.
The figures from Halifax are in line with those produced by the Nationwide building society, the other closely watched house price index, which showed house prices over the last three months had fallen 1.5 per cent but had risen 1.4 per cent in October year-on-year.
The most recent data from the Council of Mortgage Lenders (CML) also showed the number of mortgage approvals for last month were less than half their average prior to the economic downturn. First-time buyers are on average being asked for a deposit of around 20 per cent from lenders, according to the CML.