House prices stabilised in September leaving the annual inflation rate also steady at minus 5.3 percent. The outturn was stronger than the market consensus but represented just the second month in the last five in which prices have not fallen. Indeed, all regions posted decreases over the third quarter with the South West, down 6.3 percent on the year, particularly weak.

Market activity remains soft and mortgage approvals in September declined to 49,444, their lowest level since February. Affordability remains a significant restraint but with financial markets having trimmed their expectations for interest rates over coming months, may not be quite the issue now that it seemed likely to be just a short while ago. In fact, the Nationwide still believes that a relatively soft landing remains achievable, particularly should unemployment remain low.

Even so, in terms of the broader picture, today's update puts the UK's RPI at minus 9 and the RPI-P at minus 18, both measures showing a limited degree of underperformance that will strengthen the view that Bank Rate might have topped out.

Prices are seen falling 0.4 percent on the month, reducing the annual inflation rate from minus 5.3 percent to minus 5.8 percent.

The Nationwide House Price Index (HPI) provides house price information derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted; that is, they track a representative house price over time rather than the simple average price.

Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.

Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.