The annual rate of house price decline eased to 3.3% in September compared with 4.8% in August, according to the property website Rightmove.

The average in England and Wales dropped by 1% to £227,438 during the five weeks to September 13, less than the falls recorded during each of the previous three months.

Miles Shipside, commercial director of Rightmove, said: "The housing market is still on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets.

"We are now seeing the lowest level of new sellers for years. There's a baseline level of activity from those that have to sell, but beyond that, discretionary sellers are increasingly scarce."

He said the current economic climate was deterring new sellers from entering the market, leading to the first fall in the average number of properties agents had on their books for seven months, with the level easing to 78 from 79.

Rightmove warned that with repossessions likely to rise, the higher proportion of forced sales was likely to further increase downward pressure on prices.

It added that agents reported that many of the sales that were going through involved a homeowner who needed to sell, generally due to a death, divorce or debt, or because properties had been used as part-exchange.

London was the only area of the country not to record a house price fall during the period, with the average asking price in the capital soaring by 4% during the month, although Rightmove cautioned that some of the gain was likely to be a correction following the previous month's fall of 5.3%.

It added that asking prices in London had fallen by 1.5% during the past quarter, in line with the downward trend across the rest of the country.

The East Midlands saw the steepest prices falls during the month, with asking prices in the region diving by 5.3%, while in the South West they dropped by 3.9%. But the West Midlands, Wales and East Anglia saw lesser price falls of between 0.1% and 0.4%.

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