Nationwide issued its house price index for September yesterday. It showed that house prices rose on average 0.9% between August and September. The tri-monthly measure, which is less volatile and widely regarded as the more accurate short term indicator rose from a growth of 3.3% in the 3 months ending August, to a growth of 3.8% in the 3 months ending September.

This is the fifth monthly rise recorded by the Nationwide, and the lender now has the average UK house price at the same as it was in September last year -- before the catastrophic collapse of Lehman Brothers.

None the less, this still does not signal the end of the crisis, because -- as even Nationwide acknowledge -- transactions are still far too low to support such growth, leaving it based solely on the drastic shortage of housing supply.

Martin Gahbauer, Nationwide's chief economist said:

"The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed. However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months."

But as we continue to say, house prices make no difference to people who want to sell their house, because you will save what you lose on the house you buy, which will also have lost value. Sell your house with Zungalow for just £29 per year.

As you may know, house prices fell in August according to the Land Registry index. Mortgage approvals also fell in August. We have warned for some time on this blog that the price rises we were seeing in the past few months did not represent a bottom in the market, and now it looks like we are finally going to be proved right.

The house price rise was easy to brush aside, because we knew it was based on short-supply in only a few areas. However, the rising mortgage approvals growing month on month and even showing massive hikes on last year's figure was hard to argue with -- even though the rises still left mortgage approvals a lot lower than you would expect to find in a market where prices are rising.

Now, the reality that we are facing is this: The Land Registry says prices fell in August, but its index is lagged by 2-3 months. That means that house prices were struggling even when mortgage approvals were rising.

Now that things are heading south again we say: buckle up, this is the start of the second dip we have been forecasting for some time, and we are in for some pretty sharp house price reductions in the coming months.

This doesn't mean that you can't sell your house. As we have said on this blog before, all houses are falling in value, so by the time you sell your house at a reduced price, and buy your new house at a similarly reduced price, you will be in about the same boat as you would in 2007.

It has been revealed that Halifax's valuing system for mortgages is leading to people paying higher rates because their properties are being undervalued.

The Times broke the story on the Halifax undervaluing property by up to £35,000, which potentially adds £12,000 to the cost of a mortgage.

The article featured the story of Simon Lord, 49, an estate agent, and his wife Katherine, 44, from Bath.

The couple came to the end of their mortgage with Halifax in July, and their house was automatically valued. The Halifax valuation, based on its index said that the Lord's had 25% equity in their house.

Unhappy with the figure, the Lord's paid £1,000 for Halifax’s own surveyor, Colleys, to visit their property for a physical valuation. This turned out to be 35.6% higher, at more than £1m, giving them the 60% equity required for the top deals.

“We would have had to acquiesce to a far less favourable mortgage if we’d accepted Halifax’s initial valuation,” said Lord.

Halifax said it updates its index every quarter for valuation purposes. This penalises home owners when prices are rising, though benefits them in a falling market. A spokeswoman said: “We’re confident that we have a robust process in place.”

This story adds even more weight to the advice we have been giving for several months now, people need to be carrying out their own valuations, even if they are using the services of an estate agent. This way they will know if someone is either undervaluing or overvaluing their house.

Find out how to value your own house in our How to Sell Your House guide.

Nationwide have issued their figures on UK house prices for August, and it contains yet more positive news.

The average house price was 1.6% higher in August than it was in July. This the 4th consecutive monthly increase in UK house prices.

Growth on the less volatile and reputedly more accurate tri-monthly measure accelerated from a growth of 2.7% in the three months ending June, to 3.3% in the three months ending August. And annually the rate of decline has slowed from 6.2% to 2.7%.

Martin Gahbauer, Nationwide's chief economist has put the upward pressure down to the low interest rates, but as I have already commented on Write About Property, I am taking that with a pinch of salt, because, lest we not forget Nationwide has every reason to create positive sentiment on the housing market.

I'll tell you what I told them:

"The reality is that transaction levels are still sucky, no one with a hefty deposit can get an affordable mortgage, and that is out of the people who have sufficient job security to even want a mortgage in the current climate. The only prop underneath prices is the fact that supply is low and this has meant that buyers have temporarily lost the buyers-market power they had in 2008, if that changes prices will fall again."

So there you have it. The advice you can take from that is: get in quick and sell in a sellers' market, before too many people catch on.

A poll by moneysupermarket.com has found an alarming number of first time buyers are planning to take out a loan to cover the deposit on their first mortgage, because of the bank's making life difficult for anyone who doesn't have at least a 25% deposit.

Of the 13 percent of 18 - 34 year olds planning to buy their first home in the next year, 16 percent of them are planning to do so by taking out a loan for a substantial deposit. This is a bad move, according to Louise Cuming, of moneysupermarket.com.

"Anyone who takes a loan is effectively taking out a 100 per cent mortgage through the back door. Not only will the mortgage lender decline the application if it discovers this is the source of the deposit, but it is also a huge risk to the borrower - your monthly outgoings will be higher, which means there is a greater chance of you finding yourself unable to keep up with repayments," she said.

Cuming also said that high deposits were pricing many people out of the market, and suggested that lenders should assess the affordability of each mortgage on a case-by-case basis.

Only a quarter of those surveyed already have a deposit saved, other's are waiting for prices to drop further, and some are even hopeful of a swift return for 100% mortgages.

Currently lenders are offering their best rates to people who have a deposit of 40%, and anyone who has less than 25% to put down is finding their choice of mortgage product severely restricted.

As we all know, there is currently a lot of positive news in the housing market, with prices rising on a monthly basis for some months now according to some indices, by 2% since April according to the Halifax and Nationwide, and all indices including that of the government showing the rate of decline having slowed massively.

But as we all also know, this current reversal of the downward trend has not been caused by a massive upsurge in activity like you would expect if the market had bottomed, but is in fact based on a marginal increase in activity, which has acted in conjunction with a massive supply short-fall to put upward pressure on prices.

The trouble with that is, if supply increases faster than demand, the upward pressure on prices will evaporate and we will likely be in for further sharp declines as the actors putting downward pressure on prices, like the restricted mortgage market and soaring unemployment, are able to take their full effect.

Such a scenario would seem likely; as the positive news could well make the thousands of people holding their property off the market think that now is the time to go for the sell. With that threat seemingly hanging over us guillotine-like, it is easy to focus so completely on it to become blinded to any other possible outcome.

But is the positive news likely to make the holders sell now? When you think about it calmly the answer is no, not really; these people don't want to sell because of the losses they face on their property, the 2% increase barely bites into the 20% loss we have seen so far.

On the other hand: who wants to buy a house if it is going to lose even 10% of its value within a year, let alone the 40% falls some analysts were predicting a few months back? So it is surely equally possible that the currently positive news -- that has made even the likes of BOE guy say that the worst of the price falls are over -- would bring more buyers into play?

If the number of buyers was to increase greatly, faster than supply increases, which is possible if not likely, then this will increase the upward pressure on prices and accelerate the price rises and slow the rate of decline faster.

In this scenario, this continuation of price growth would indeed see supply levels start to increase, and this would be the beginnings of a sustained recovery in the housing market. The recovery started by shockingly low supply, well it's got to start somewhere.

Of course there are three very big problems, namely:

1. Unemployment is currently massive and still rising
2. Banks are still being very cautious about who they lend to (especially who they lend 125%LTV to)
3. Vendors still are not being realistic about their asking prices, according to Rightmove's latest index the average asking price of new additions to the site is 40% higher than the average Land Registry sale price. This is worsening the supply shortage

Sure, they are three problems, each capable of preventing my scenario from becoming a reality, not to mention the fact that with supply so short too many buyers may not be able to find a home suitable for them. The truth is no one can say with any certainty what is going to happen next. Time will tell.

In my last article I wrote about the inextricable link between house prices and house affordability vis-a-vis first time buyers. That article attempted to use the dynamics house price correction to forecast the future of this one. The dynamics were tracked using 2 sources: the house price to (first time buyers) earnings ratio index by Nationwide, and an article based on the nationwide index comparing average mortgage repayments to the average first time buyers' take home pay.

The external article forecast a further 15% drop, and my findings led me to warn of the possibility it could be even more than that.

However, today the Centre for Economics and Business Research said another 8% would bottom the market, and there were reports that affordability has trebled since the peak according to the Halifax. Halifax said mortgage payments now take just 31% of first time buyers disposable income compared to 48% at the peak. This is massively different to the Nationwide affordability scales.

Liam Bailey, of Write About Property -- who I would now call a new friend of mine having been in contact since referencing his article -- said the different might be because the Halifax figure is based mostly on couples, as first time buyers usually come in pairs. He is still waiting for Halifax to return his call, which will be tomorrow now.

I was surprised Liam didn't highlight the possibility that the difference could be because of the different areas the companies operate in, and the fact that the Halifax is an estate agent as well as a mortgage lender.

Halifax operates mainly in and around Yorkshire and Northern England, where houses are always more affordable than the rest of the country. For instance at the peak of the boom, average mortgage repayments stayed below 100% of average first time buyers take home pay, whereas the UK average was 136.2% at the time (according to Nationwide's historical index).

If in fact the Halifax's operation as an estate agent as well as a lender is in any way responsible for the massive difference between its affordability index and that of Nationwide, then indirectly Liam is correct; because estate agents deal with the couple buying, and not just perhaps the one who is borrowing

I read an article on Write About Property yesterday, which showed how past house price corrections have come at a time when first time buyers had been priced out of the market, and lasted until first time buyers could comfortably afford to buy houses again. The figure the article mentioned was a further 15%, which would bring average mortgage repayments down to about half the average salary of a first time buyer.

The article was based on a fairly loose prediction of what the current nationwide affordability index (the index of average mortgage repayments as a percentage of average first time buyer salaries) would stand at, because the Q1 2009 figures have not yet been released.

But if we apply the same methods to the House Price vs Earnings ratio (HPER), that is to track how the rise and falls of the last crash measured on the HPER ratio, which does have up to date figures, it paints an even worse picture.

The last house price correction began when, and in my opinion (and Write About Property's) began because gross house prices were pricing first time buyers out of the market; in Q4 1989 when the average gross house price was 3.7 times the average salary of first time buyers.

Major price falls ended in Q3 1993 when the average house price had come down to 2.3 times the average first time buyer's salary. Prices then bounced around the bottom until Q2 1996.

The house prices started growing again, and the HPER index reached had reached 2.5x when there was a growth slowdown which kept it below 2.7 until Q3 1999 when growth began to accelerate. From then on (barring a couple of minor growth slowdowns) the HPER index grew by at least .1x almost every quarter. By Q4 2007 the average gross price of a house was 5.4 times the salary of average first time buyers, and shock horror, growth began to slow before spiralling into the plummet we are still dealing with.

Irrelevant of why prices were allowed to grow to such ridiculous levels, I believe it was because of the investment boom, but whatever the reason if the last crash is an indicator for this one, which I believe it is, house prices will fall until they are no more than 2.3 times an average first time buyers salary.

According to Nationwide the average house price has fallen by approximately 15% between Q4 2007 and Q1 2009. The HPER index has come down to 4.1x. Going by that, if a 15% drop takes only one multiplication off the HPER index, then we need another 30% drop.

I don't actually believe prices will drop another 30%, because the HPER index fails to factor couples buying together, interest rates and many other factors, but between the Write About Property article, and this one, I think there is room for us all to be sceptical about the next green shoots report -- until houses are more affordable to average first time buyers anyway.

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The Chancellor's budget revealed yesterday contained several very promising measures aimed at stalling the UK house price freefall and kick-starting recovery. But the truth is that the housing market cannot recover without a wider economic recovery; sufficient numbers aren't considering buying a home while millions are unemployed and millions more in fear of their jobs.

So the question property professionals should be asking today is not so much: will Darling's measures aimed at the housing industry work? But rather: will Darling's budget bring a swift recovery to the wider economy so that his housing measures may have their full effect.

For instance: Darling extended the funding for the shared equity HomeBuy Direct scheme by £80m. Under this scheme the government can loan up to 30% of a home's value to first time buyers or other eligible parties, which can be used as a deposit in order to get a good mortgage deal. But unless the employment situation improves the additional funding will hardly be needed.

It is therefore hoped that Darling's economic spending such as: the £750m Strategic Investment Fund to help emerging technologies and regionally important sectors, will work in conjunction with the £250m to help people get work experience in growth industries, to create new jobs, which the £1.7bn of additional funding for the Job Centre Network will ensure are quickly and efficiently filled.

Darling also announced government backing for mortgages, and £500m to kick-start stalled developments, which will increase housing supply as well as saving and providing construction jobs.

If (dare I say when) it all comes together, increasing and secure employment will mean more people looking to buy homes, government securities will mean mortgages are more available when they do, and the HomeBuy and other shared equity schemes will solve the problems with raising a deposit for those in newly secure employment, and the £500m will have ensured there are plenty of homes for them to buy.

However, by Darling's admission 2009 is going to be a rough year for the UK economy, worse than any year since the great depression of the 1930's, so none of those things are going to happen until, at best early 2010, more likely mid 2010. That said: for 2009 it is a case of battening down the hatches and weathering the storm; it may well get worse before it gets better.

The Royal Bank of Scotland has agreed to a move that will see £1.7bn being allocated to mortgage lending in Scotland.

Chief executive, Paul Geddes of consumer banking at RBS Group, said: "Our message to customers in Scotland is very clear, we are now more than ever open for mortgage business.

"We hope the latest commitment goes some way to refuelling the Scottish economy and provides borrowers with the financial means to get back on track and realise their plans for the future."

Jim Murphy, Scottish Secretary said "When the UK Government moved decisively to underpin our banks it was to save the lifeline services they provide for individuals and businesses and to allow us to keep moving economically.

"Today's news shows we were right to do so and highlights the positive effects which are emerging as a result."

Scottish finance secretary John Swinney added "When the UK Government moved decisively to underpin our banks it was to save the lifeline services they provide for individuals and businesses and to allow us to keep moving economically.

"Today's news shows we were right to do so and highlights the positive effects which are emerging as a result."