HOUSE prices fell by 1.1 per cent last month as the property market continued to weaken, according to figures published yesterday.

During the past year, prices have increased by 18.5 per cent, with the annual rate of growth now below 20 per cent for the first time in six months, according to the Halifax monthly house price index report.

On a quarterly basis, prices fell for the first time since the last quarter of 2000, down 0.4 per cent between July and October.

There are signs that the ratio of house prices to earnings may have peaked, the Halifax said.

The recent series of interest rate increases have raised mortgage payments as a percentage of earnings from 14 per cent to 19 per cent for new borrowers during the past year, though this still remains well below the peak of 34 per cent in 1990.

Despite the continuing slowdown, a crash is still unlikely, economists say, pointing to growth in employment and household income, the low level of interest rates and supply constraints in the South, which they say will all underpin the market.