House prices fell in August for the first time this year, according to Halifax's monthly house price index.
The index shows a 0.6 per cent drop in prices, with the average house price dropping to £160,565 from £161,466 in July. In July, prices rose by 1.1 per cent, in June they were up 1.2 per cent and in August 2003 they rose by 1.7 per cent.
Halifax says the 1.8 per cent rise in prices over the last three months is significantly lower than the 6.5 per cent rise in the preceding three months. It believes that the five rises in bank base rate since November last year are starting to act as a brake.
Halifax predicts that house price inflation will slow gradually over the rest of this year and into next year.
It points to the Royal Institute of Chartered Surveyors' monthly survey which shows a rise in unsold properties on estate agents' books and fall in buyer enquiries. Bank of England figures have also shown a drop in the number of mortgages approved for house purchase.
Halifax chief economist Martin Ellis says: “Occasional monthly falls are part of the normal fluctuations in the housing market, even during periods when the market is very strong. Indeed, this is the 10th monthly fall in the last five years, a period when prices have been on a very strong upward trend. We continue to expect house price inflation to slow gradually over the remainder of 2004 and into next year as higher interest rates and the increasing difficulties faced by potential first-time buyers in entering the market curb housing demand.”