The housing market should ease off in the second half of this year after average prices rose by 1.6 per cent in the first three months - the equivalent of 6.6 per cent a year.

Halifax, Britain's biggest mortgage lender said the average price rose by 0.9 per cent in March to breach the £175,000 barrier for the first time and push year-on-year house price inflation up to 6.2 per cent from 5.5 per cent in February and a recent low of 2.3 per cent in July last year. But Martin Ellis stood by his forecast that the annual increase would fall back to three per cent for 2006 as a whole. He noted that the rise in the first three months of the year was less than those in both the final quarters of 2005.

The number of mortgages approved for house purchase fell in February for the first time in 15 months, he added. The latest survey by the Royal Institution of Chartered Surveyors reported that the number of completed sales had stabilised since the beginning of the year.

"Housing demand remains well under-pinned by a strengthening economy, a near record high level of employment and low interest rates," Mr Ellis said. "These factors will continue to support the market over the remainder of 2006."

Against that, the labour market has weakened in recent months, Mr Ellis added. There were 7,000 fewer people employed in the three months to January than in the preceding three months.

"The weakening in the labour market and the continuing high level of house prices in relation to earnings are expected to curb housing demand," he said.

"At the same time, the recently announced substantial increases in utility bills and above-inflation council tax rises will put pressure on householders' finances, also dampening housing demand.

"These developments should prevent a sustained acceleration in house price inflation."

Halifax's numbers were broadly in line with those from Nationwide, which showed house prices rising by 1.1 per cent in March, pushing year-on-year house price inflation up to 5.3 per cent.

There are now only four UK regions - the North, Yorkshire and the Humber, the Northwest and Scotland - where the average home costs less than £150,000.

The North was the only region to see a fall in the cost of property during the first quarter, with prices dipping by 1.2 per cent.

Halifax said this should be viewed in the context of a 147 per cent jump in North of England prices during the past five years. It doubted if this decline marked the beginning of a downward trend.

The annual rate of house price growth was in single digits in all regions of the UK during the first quarter, with the North West seeing the strongest year-on-year jump of 9.4 per cent, followed by Yorkshire and the Humber and Wales at 9.3 per cent and 8.8 per cent respectively. Annual house price inflation had slowed in all regions during the past year except London, where the present rate of 7.2 per cent contrasted with 1.1 per cent during the first quarter of last year.