House prices were unchanged in October but the annual rate of increase edged up to a five-month high, Halifax said today, in further evidence of a stabilising property market.

All houses, all buyers index (1983=100) Index (seasonally adjusted) 544.4 Monthly change 0.0% Annual change 3.9% Standardised average price (seasonally adjusted) £168,210

The pattern of price movements during recent months shows that the market has strengthened, but the static level of prices in October suggests that we are not poised for another sustained period of sharply rising property values, according to the mortgage lender.

On an annual basis, house prices were up 3.9%, significantly below the 18.5% recorded in October 2004.

Housing market activity continues to improve. The number of mortgage approvals to fund house purchase rose for the third successive month in September, according to the Bank of England, and was 24% higher than in September 2004. Buyer enquiries for property increased for the fourth successive month in September, according to the latest RICS survey, marking the longest run of rising enquiries in two years.

Martin Ellis, chief economist at Halifax, said: "Continuing economic growth, the high level of employment and a boost to household sentiment regarding the future direction of interest rates following August's base rate cut are all supporting housing demand. This year's slowdown in the pace of UK economic growth and the ongoing historically high level of house prices relative to average earnings are, however, expected to curb the recent improvement in housing demand and prevent a marked pick-up in prices."

Key indicators provide further evidence that housing market activity continues to recover, pointed out Mr Ellis. Inland Revenue figures show that the number of property transactions increased by 16% between the second and third quarters of 2005, mortgage approvals rose fort the third successive month and estate agents report a rise in sales.

"Sustained economic growth, high levels of employment and healthy earnings growth are all supporting housing demand," said Mr Ellis.