British house prices dropped 0.4 percent in September after a bigger than initially estimated 0.5 percent fall in August, leaving prices in the third quarter of 2012 1.2 percent lower than a year earlier.

Economists had expected house prices to hold steady in September and to be 0.9 percent lower on the year.

"The generally weak economic climate remains a significant constraint on housing demand," Halifax economist Martin Ellis said.

"The relatively low level of mortgage payments in relation to income, however, continues to provide support for house prices. We expect house prices to be broadly unchanged over the rest of this year and into 2013," he added.

Halifax is part of Lloyds Banking Group, one of Britain's biggest banking groups.