House prices rose by 0.2% in July and the three-month annual rate of increase slowed to 2.3% - the lowest since April 1996, HBOS said in its Halifax house price survey released today.

Affordability is in line with the long-run historical average the bank said. Yesterday's 25 basis points cut in interest rates will reduce mortgage payments as a proportion of gross income for the average new borrower from 20% to 19%, the average for the past 20 years and well below the 34% peak in 1990.

Recent figures provide further signs of a steady improvement in housing market activity in recent months. The number of loans approved for house purchase in Quarter 2 was 10% higher than in Quarter 1, according to the latest Bank of England figures. Estate agents confirm these signs of improvement with the latest monthly RICS survey reporting a modest rise in completed property sales since February 2005 and the first increase in buyer enquiries for five months in June.

The Halifax house price index is the UK's longest running monthly house price series with data covering the whole country going back to January 1983. The Index is typically based on around 15,000 house purchases per month, and covers the whole calendar month. From this data, a "standardised" house price is calculated and property price movements on a like-for-like basis (including seasonal adjustments) are analysed over time. Properties over £1 million are included.