At 5.1%, house price inflation on an annual basis, is unchanged from last month according to figures from the Halifax today.

However, house prices fell by 0.4% in January, the first monthly decline since May 2005. Yet at the same time, prices have increased overall by 1.6% over the past three months.

This mixed pattern of monthly price rises and falls is a typical feature of a slow housing market, said the UK's biggest mortgage lender. Last year, for example, there were three monthly falls.

The 5.1% annual basis house price inflation is significantly below the 13.7% annual growth rate recorded in January 2005, said the lender. The market is expected to be flat in 2006 with modest nominal house price growth and no change in real terms. UK house prices are forecast to rise by 3% in 2006, broadly in line with the predicted rise in retail price inflation.

The continuing high level of house prices in relation to earnings, however, should curb housing demand in 2006. Both council tax and utility bills are expected to rise by well above inflation in 2006, putting pressure on household finances. The recent media reports about significant increases in fuel bills – in the 20-25% - highlight this issue.

The number of loans approved for house purchase increased again in December, according to the latest Bank of England figures. The number of loans, at 122,000, on a seasonally adjusted basis, was 51% higher than in December 2004 and was at its highest level since May 2004. The number of new buyer enquiries increased for the seventh successive month in December, marking the longest unbroken run since 1999, according to the latest RICS survey.