There’s good news for house hunters with lower mortgage rates and higher wages helping to improve affordability even as house prices edged higher.

The Housing Industry Association-Commonwealth Bank housing affordability index rose by 0.8 per cent in the June quarter, to 56.2 from 55.7 per cent. Lending data from CBA, used in the index, showed an 0.8 per cent increase in the April-June period of Australia’s median home price to $471,400.

Other recent reports point to stagnating or falling home prices in many regions around the country as concerns about the wider economy deter some people from the property market.

Still, unemployment levels remain low, at just above 5 per cent, and commercial banks have been trimming their fixed-term mortgage rates in recent weeks. The Reserve Bank may also cut its key cash rate in coming months to reflect softening demand in the economy and reduced inflation risks.

By most measures, however, home prices have been sinking in the new year. RP Data-Rismark information shows capital city home prices down 2 per cent in the year to June, on a seasonally adjusted basis. Home prices fell 0.2 per cent in June, according to RP Data-Rismark. Borrowing for and building homes has slowed in 2011 while affordability remains constrained for many would-be buyers.

The pace of building has stalled amid uncertainty about the economy and about the direction of interest rates to come. Residential construction work fell by 4.1 per cent in the June quarter to $11.4 billion, the Australian Bureau of Statistics said yesterday.

The RBA will meet September 6 to decide on interest rates, with the market currently pricing in a 55 per cent chance of a 25 basis point cut.