September is the third consecutive month in which house prices have fallen after a 0.5% decline in August, something that hasn't happened since the start of 2011.
Matthew Turner, director of Astute Property Search buying agents, said the decline over three months is consistent with the “general malaise” in the economy.
He said: "While low mortgage payments may be supporting house prices, the ongoing difficulty to secure finance at higher loan to values is preventing the market from moving forward.
"Until the LTV deadlock is broken, the housing market will remain in a limbo.”
However Halifax said house price falls have been relatively modest and on a more stable rolling three month average basis prices are only down by 0.5%, compared to declines of 1% seen at the start of the year.
Independent buying agent Gabby Adler said: “The overriding impression of the housing market in recent months has been flat but with prices now sliding slightly on a quarterly, as well as a monthly basis, it is fair to say that there is now a slight deterioration in outlook.
“As usual there are regional differences, with some areas continuing to see growth and others seeing sharp declines.”
This fall in prices over the month is in line with data from Nationwide released on Monday which also recorded a 0.4% drop during September.
However Mark Harris, chief executive of mortgage broker SPF Private Clients, was sceptical the government’s objective would be realised by the lenders taking up the scheme.
He said: “The jury is still out on Funding for Lending and it would be good to see some data as to exactly who is borrowing what under the scheme, as transparency is something the market lacks.
“One lender recently voiced its concern to me about the perceived stigma attached to taking advantage of the funds available, fearing it gives the wrong message to customers that it is in some sort of crisis. This is a challenge for the Bank to resolve if the scheme is to have real success.”
The government’s Funding for Lending Scheme, which started on the 1 August, was intended to improve the flow of mortgages as well as loans to small businesses by providing cheaper funds to banks and buildings societies therefore creating more demand for properties.
Yesterday the Council of Mortgage Lenders said it was too early to judge whether it had been a success.
