Lower prices, fewer buyers - but Halifax dismisses fears of crash

UK house prices fell last month, according to the Halifax. A dip of 0.5 per cent was recorded in October, reducing annual inflation in the market from September's 10.7 per cent to 8.9 per cent.

As a result, the average cost of a UK home is edging away from the £200,000 mark. According to the bank, Britain's biggest mortgage lender, the figure now stands at £197,248.

The Halifax survey is the latest indication that five rises in UK interest rates since August last year have dampened demand in the housing market. Recent reports from surveyors' groups, mortgage lenders and property websites show fewer buyers ready to stump up for property. What's more, the fall-out from the collapse of the US sub-prime market has damaged the ability of some lenders to offer mortgages.

Nevertheless, Halifax disputes any talk that current price falls may soon morph into a full-blown crash: "The rise in interest rates and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity," said Martin Ellis, chief economist at the bank.

He went on: "The UK economy is in a strong position. High levels of employment and a shortage in the number of properties available for sale will continue to support house prices."