Average house prices in England and Wales have fallen by nearly £4,000 in the last five weeks, said property website Rightmove today.

The company blamed the Bank of England's continuing pressure on the market by raising rates beyond the point at which the housing market had turned. "By the time of the June MPC meeting when it was decided to raise rates to 4.5%, the housing market was already on the turn," said Rightmove.

In just five weeks up to August 14th, asking prices fell 2% and the annual rate of house price inflation fell for the first time in seven months. In July it reached its highest level for 16 months – 18.0% – before falling back to 15.7% this month.

Miles Shipside, Rightmove commercial director said, “While annual house price inflation rose strongly in the first half of 2004, it remained well below the levels of over 26% Rightmove saw at the beginning of 2003."

"As you would expect, the gradual slowdown in the housing market is now feeding through into a steady fall in the rate, which has dropped from 18% last month to 15.7% this month.”

Miles Shipside said recent rises in official interest rates were creating a buyer's market. "The Bank of England can't raise the cost of borrowing five times in nine months without something happening," he said.

"While it took much longer than people expected, it is now hitting the housing market at the sharp end and asking prices have been declining in each of the last five weeks."

Asking prices have fallen from £196,198 on 10th July (Rightmove’s highest ever figure) to £192,335 on 14th August.

The South leads the market downwards, with a fall of 4.3% in Greater London; the Midlands and Wales follow suit. Yorkshire, the North and North West continue to rise – but the increases are much smaller than in previous months.

Miles Shipside said that the slowdown should not be seen as the beginning of a long period of declining prices but rather a sign that the market is working the way it should do. "There are, quite simply, fewer people out there looking to buy homes and more properties for them to purchase," he said.