Average house price was up 6.9 per cent to £183,959 for the fourth quarter compared with the fourth quarter of 2006; however, the annual growth rate slowed from 9.3 per cent in the third quarter. While growth was 1.6 per cent in the third quarter compared with the second, growth in the fourth quarter dropped to just one per cent.

It comes as no surprise that London was the most expensive region for property, while the North was the least expensive. The study shows that Northern Ireland saw the most substantial price rises, while Yorkshire and Humberside saw the lowest growth.

Chief economist, Fionnuala Earley, said: “In the short-term, supply issues are likely to provide some support in the areas where supply constraints are most critical, but over the longer-term, the growth in pent-up demand is likely to mean that the market will turn around more rapidly once confidence and affordability have been restored to more usual levels.”

Meanwhile, the Bank of England is predicting further mortgage struggles for homeowners in 2008, with first-time buyers and those coming to the end of fixed-rate deals likely to struggle most.

Its quarterly report reveals that secured bank lending to households was “materially reduced” during the last quarter and the Bank is expecting mortgage defaults to increase over the next three months. Demand for all mortgage types is set to fall, while a “significant and anticipated increase” in borrowing rates is also on the cards.

According to the report, 31.2 per cent more lenders said mortgage availability had worsened last quarter than those reporting that availability had remained the same. This is a significant change compared with the previous quarter when 0.1 per cent reported that mortgages were more accessible.

However, the Intermediary Mortgages Lenders Association believes there is some hope. Executive director, Peter Williams, said: “Demand for secured loans has remained buoyant, and indeed demand for buy-to-let and other (non-prime) loans actually exceeded expectations overall.

“This suggests that despite the uncertainty of the credit squeeze and the consistently negative tone of the media, British consumers are still confident enough to want to borrow, partly because they take a longer-term view,” he added. The association also points out that there was increased demand for remortgaging and anticipates that further intervention from the Bank of England could help stave off a recession.

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