There was mixed news for the property market in January as house prices fell for the fourth month in a row while the number of approved mortgages rose, new figures have shown.

As the market continues its downward trend, the average cost of a home in the UK dropped by a further 0.5% during the month to £179,358, meaning homes have lost an estimated 2.3% of their value since November, according to the Nationwide Building Society.

House price inflation was at its lowest level since November 2005, easing to just 2.7%.

But the seven-month run of falls in the number of mortgages approved for home purchases came to an end as the total number of approved mortgages hit 74,000 in January, up from 72,000 in December, according to the Bank of England.

Despite the rise, the number was still the second lowest since September 1995, and about 40% below the 121,000 mortgages for home movers arranged in January 2007.

Vicky Redwood, an economist at Capital Economics, said: "January's household borrowing figures suggest that housing market activity has stabilised, at least temporarily.

"However, the previous drops have not yet had their full impact on house prices."

She added that as lenders continue to tighten their borrowing parameters, she expects mortgage approvals to resume their downward trend.

Nationwide said it is no surprise prospective buyers are wary to enter the market given the perceived downturn in the economy from the recent credit crunch and rises in fuel bills.

The lender added it is unlikely that activity will return to trend levels for some time.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "Crucially with lenders scaling back loan to value ratios and generally favouring existing homeowners in terms of lending rates, first-time buyers are continuing to struggle to get a foothold in the property market.

"Without their renewed support, prices are likely to drift lower."

The number of loans arranged for people remortgaging also rose to 119,000 from 101,000 in December, explained by a combination of falling interest rates, as well as people coming to the end of fixed-rate deals.

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