The average house price in Britain fell a bigger-than-expected 2.2% during December, leaving them more than 16% down from a year earlier, the Halifax has announced.

House prices are now at levels not seen since August 2004, with the average price tag of a home now at £159,896.

And for some, the outlook for 2009 is not looking good. House prices are expected to fall further during the year thanks in part to fears over job security and the continuing impact of the credit crunch on the availability of mortgage finance.

However, for others, the news is not as bleak. Buying a home has become more affordable than at any time since April 2003, when set against earnings, Halifax said.

Halifax added that the average house price had fallen 5.2% in the fourth quarter of 2008 – similar to the third quarter drop of 5.6% and the second quarter’s 5.1% fall. But that still means prices are falling at an annual pace of over 20%.

Martin Ellis, Halifax chief economist said: “Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert future downward pressure on the market over the coming months

But a number of factors will help to support demand and should help to limit the downturn. Improving housing affordability and an easing in the pressure on the majority of households’ finances should support market activity and prices.”