West Midlands house prices rose by just 0.5 per cent in the three months to September, making the year-on-year increase 7.1 per cent, slipping a little behind most other regions.

Halifax reported yesterday that its "standardised average" price for a West Midlands home is now £170,518 against £179,425 over the UK as a whole, where prices have now risen by eight per cent over the last 12 months and by 0.7 per cent in the third quarter - although the one-month UK increase in September was a full one per cent.

There were small falls in the East Midlands and Yorkshire & the Humber, regions where house prices have more than doubled over the past five years. Halifax pointed out that over the last 12 months all the English regions have seen a very similar trend with house prices rising between 5.5 per cent in the North and 8.5 per cent in Greater London.

The strongest UK increases were 30 per cent in Northern Ireland and 14.5 per cent in Scotland. In Wales, though, house prices have risen by only 2.9 per cent since September last year.

Martin Ellis, chief economist at Halifax, noted that despite the one per cent jump in September, year-on-year house-price inflation has declined for three months running and is now lower than in any month since April.

In Greater London the annual increase has come back from 10.9 per cent in June as the impact of last winter's City bonuses has eased off.

Mr Ellis said: "We expect increased utility bills and higher interest rates to curb housing demand over the coming months, causing annual house price inflation to ease between now and the end of the year.

"Whilst housing market activity remains firm, there are further signs that it has levelled out.

"The number of loans approved for house purchase has stabilised around 120,0000 (seasonally adjusted) a month in the three months to August, according to the Bank of England.

"Additionally, the latest RICS survey reported that completed property sales eased marginally in August for the second successive month."

Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, echoed this view.

"House prices have been rising at close to twice the pace of average earnings since the spring, putting a squeeze on affordability for new buyers.

"We expect demand to cool going into 2007 as the Bank of England is likely to raise interest rates further, though the slowdown will be gradual."

But Howard Archer, an economist at consultant Global Insight, interpreted the Halifax numbers, together with a one-month jump of 1.3 per cent reported by Nationwide, as evidence that house prices have recently regained significant upward momentum.

"House prices could well see further marked increases in the very near term, given the current level of mortgage activity, survey evidence showing strong buyer interest, strong demand from the buy-to-let sector and a shortage of properties in some areas.

"Nevertheless, we continue to believe that house prices will ultimately be reined in by affordability constraints and will settle down into relatively modest rises."