House prices fell slightly in May by 0.4% following a 0.1% decline in April, according to the Halifax House Price Index.
The average UK house price now stands at £167,570, with annual growth of 6.9% up from 6.6% in April.
This is the largest rate of change in annual growth Halifax has recorded since October 2007, as house price changes in March and April compared favourably with the significant declines during the same period last year.
In addition, the lack of supply of houses for sale was a key factor in 2009 house price growth. Now, more people are being encouraged to put their properties on the market by improving market conditions, the scrapping of HIPs and potential CGT changes.
However, Halifax reported house sales fell by 18% between Q4 2009 and Q1 2010, following three consecutive quarters of growth from the low in Q1 2009.
It is difficult to judge whether this fall was part of a trend because of temporary factors such as the end of the Stamp Duty holiday and bad weather, Halifax says.
Home sales in the first quarter of 2010 were still 27% higher than for the same period the year before.
Martin Ellis, housing economist for Halifax, says: "The mixed pattern of monthly price rises and falls so far this year is consistent with a slowing market and is in line with our view that house prices will be flat during 2010 as a whole.
"The relative recovery in house prices in 2009 was driven by a boost to demand from reduced interest rates combined with a lack of properties for sale. These factors have lost some momentum in recent months. Further falls in the number of people in employment are curbing housing demand whilst the pickup in market conditions last year has encouraged more homeowners to attempt to sell their property."
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