British house prices unexpectedly fell last month and recorded their smallest quarterly increase in nearly two years, adding to signs that the market is cooling, figures from mortgage lender Halifax showed today.
House prices dropped 0.4% in October, in contrast to economists' forecasts of a 0.4% rise, and the 0.6% increase previously reported for September was revised down.
Looking at the three months to October - which many analysts prefer, as it smooths out monthly volatility - house prices grew by just 0.8%.
This was the smallest increase since late 2012 when the recent surge in house prices started to get under way.
Halifax said growth was still strong enough to support housing demand over the coming months, but that buyers were getting worried about higher Bank of England interest rates, which many economists expect to rise in the middle of next year.
"This concern is likely to curb buying intentions," said Martin Ellis, housing economist at Halifax.
Annual UK house price inflation peaked in June at 10.2% according to Halifax figures, but is now just 8.8%, and data from rival lender Nationwide have shown a similar trend.
The number of new mortgages issued by lenders fell in September to its lowest since July 2013, according to figures from the Bank of England, partly due to tougher affordability requirements introduced by regulators in late April.
Bank of England Governor Mark Carney said earlier in the year that big rises in borrowing to pay more for expensive homes could prove the biggest threat to Britain's recovery.
The housing market was an early driver of Britain's robust recovery over the past 18 months, but more recently there have been tentative signs that economic growth may slowing, as export prospects to the euro zone darken.
