Hopes for a recovery in the housing market were fuelled today as Halifax, the building society, recorded a 1.6 per cent increase in house prices for September.

Halifax said that house prices rose for the third consecutive month in September and have risen in five monthly periods so far in 2009.

House prices nationally have risen by 1.7 per cent since the end of 2008, the building society said.

Prices have still fallen by 7.4 per cent year-on-year, according to Halifax, which is an improvement on the annualised fall of 10.1 per cent that was recorded in August.

Martin Ellis, Halifax’s housing economist, said: “The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months.”

He said that mortgage payments as a proportion of disposable earnings were well below the average for the last 25 years, which has further increased demand for housing.

Mr Ellis warned, however, that the rise in house prices was not guaranteed to continue.

He said: “Continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand. There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale.

“This development could loosen market conditions by alleviating the current shortage of supply and curb the pace of house price growth evident in recent months.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “While it is now looking very likely that April marked the trough in house prices on the Halifax measure, we suspect that they will be prone to relapses over the coming months and we very much doubt that a sharp, sustainable upward trend in house prices is in the process of developing.

“Much will clearly depend on whether the economy can sustain a probable return to growth in the third quarter, how much further unemployment rises, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months.”

Figures released by the Nationwide last week suggested that house prices in Britain were back to the levels last seen before the collapse of Lehman Brothers in September 2008, after a fifth consecutive month of increasing prices.

In the last few months, Nationwide’s analysis of the housing market has been far more optimistic than that at Halifax.

However, Nationwide has also urged caution and warned that the upward trend is not guaranteed to continue due to a continued shortage of mortgages and the impending removal of the stamp duty holiday.

The recovery of the housing market is generally seen as a strong indicator of recovering confidence in the economy as a whole, and tends to mirror the sharp rise in equity prices.

As the Monetary Policy Committee of the Bank of England meets later this week to consider raising interest rates above their record low of 0.5 per cent, they will have to consider the prospects for the housing market, which some observers say will not continue to improve given the threat of future job losses and a “double dip” recession.

Any increase in interest rates — though not expected before the end of the year — would also have a detrimental effect on the upward trajectory of house prices.

There was controversy last month after the CBI, the employers’ organisation, said that house prices would fall by 9.8 per cent this year and struggle to get into positive territory in 2010.

This figure, however, was obtained by comparing the average house prices in 2008 and 2009, rather than year-on-year trends.

The recovery of house prices continues to be slowed by a relatively low turnover of 4 per cent compared with about 8 per cent before the crisis.

The average house price can still be said to have increased, even when there is a smaller stock of houses up for sale.

Nationwide suggested that an increasing number of people may have become “accidental landlords”, where they have bought a new house but have been unable to sell their old property, which they are now renting out.

House prices could fall if this stock of rental properties starts to decrease, the building society said.

The consensus from analysts and estate agents is that any rise in house prices is to be welcomed in a period of gradual economic recovery, but that the small increase in prices and in the number of mortgage approvals is belied by the fragility of a market that could yet take another downward turn.