British house prices broke a 10-month string of declines in January, rising unexpectedly by 1.9% from the previous month, mortgage lender Halifax reported Thursday.
But Halifax warned against reading too much into the bounce, noting that house prices rarely move in the same direction month after month even during pronounced downturns.
In the three months to January, the average price declined 5.1% compared to the previous three months, Halifax said.
The average house price in January rose to 163,966 pounds ($238,479). The average price was down 17.2% from the same month last year. Economists had forecast a 1.8% monthly decline and an 18.6% annual drop.
The annual change is calculated as an average for the latest three months compared with the same period a year earlier, which provides a better view of the underlying trend, Halifax said.
House prices saw a 1.6% monthly fall in December and a 16.2% annual decline.
Halifax housing economist Martin Ellis said the January figures offer some "very early signs that market activity may be stabilizing, albeit at quite a low level."
But the scope for optimism is limited, he said.
Continuing pressures on incomes, "rising unemployment, and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to mean that 2009 will be a difficult year for the housing market," Ellis said.
Meanwhile, lower interest rates are improving affordability, Halifax said. The house price to average earnings ratio fell to 4.48 in December from a peak of 5.84 in July 2007, a 23% fall, Halifax said. The figure still remains above the long-term average of 4.0.
Sharp rate cuts that have brought the Bank of England's benchmark lending rate from 5% to 1.5% since October have reduced regular monthly mortgage payments for the 50% of mortgage borrowers with tracker and variable-rate mortgages.
The Bank of England is widely expected Thursday to cut the key lending rate by a further 50 basis points, or half a percentage point, to 1%.