House prices increased by 1.3% in July, which was very similar to the increase in June (1.2%), said the Halifax, Britains biggest mortgage lender.

The house price gains in June and July represent a clear step down from the 2.0% plus monthly price growth seen, on average, in the preceding six months. These figures, along with other housing indicators, suggest that the market may be slowing said the Halifax.

The average UK house price rose above the £160,000 mark for the first time in July 2004 to £161,831. This is more than double the average UK house price of £78,055 five years' ago, said the bank.

Only the beginning

Martin Ellis, chief economist at Halifax said, "there is likely to be a lag between when interest rate increases are announced and when their effects flow through to the housing market. It seems clear we have not yet seen the full impact of the Bank of England's recent rate moves on the property market. Accordingly, we expect the series of rate rises since late last year to continue to act as a brake on house price growth over the coming months."

Halifax said recent interest rate increases and constraints on first time buyer affordability are likely to temper house price growth over the remainder of 2004 and into 2005.

The fundamentals remain in place, however, said the bank. A combination of a strong economy, a healthy labour market, below average interest rates, along with longer- term supply shortages, should continue to underpin the market.

Terraced houses performed best over the past year

Over the year to June 2004, terraced properties were the best performing type of property across the UK with prices rising by 23%. Regionally, terraced house prices in Wales have risen the most, with prices up by 39%. Semi-detached properties were the second best performing property type with a 20% increase.

Over the last five years, bungalows were the best performing property type with prices rising by 113%. This increase is likely to partly reflect growing demand from couples downsizing their properties in retirement.

Terraced houses were the most commonly traded type of property across the UK in the second quarter of 2004, accounting for 31% of total transactions despite making up only 26% of the dwelling stock. The highest proportion of terraced properties is in Wales, representing 29% of the Welsh housing stock.

Detached houses are the most expensive property type in the UK and trade at a premium of 53% to the average property price. The premium is highest in percentage terms in London (110%) and the North West (70%) and smallest in East Anglia (35%) and Northern Ireland (42%).

Looking at price trends by age of property, properties built before 1919 have seen the fastest increase over the year to June 2004, rising by 23%. Interestingly new properties recorded the smallest increase, rising by 13.5%.