The shock tactic of an unexpected rate rise early in the year appears to have dramatically cut rises in house asking prices.

And the smaller than anticipated monthly rise in asking prices has resulted in a sharpest drop in the annual rate for 18 months.

The annual rate fell 2% last month, from 13.5% to 11.5%, Rightmove said today.

Analysts are forecasting a slowdown in the annual rate to around half the current level of 11.5% by the end of 2007. However, it is highly unusual for sellers to constrain their price aspirations so early in the year.

This month’s report shows that 143,000 newly marketed properties have increased in price by just 0.9%, by far the lowest February figure for the last 5 years. Since Rightmove started its house price index five years ago average asking prices have always increased by over 2% in February.

This is all the more surprising given wider analysis of our data. Estate agents continue to report good levels of sales activity, and our data shows average property for sale per estate agency branch at a 3 year low for this time of year. This, in conjunction with a speeding up of stock turnover since the New Year, has led to a fall in time on the market, from 88 to 78 days. This combination of factors would usually generate a rise in prices similar to previous years.

The contrary statistics point to the shock January interest rate rise knocking sellers’ traditional New Year optimism.

Miles Shipside, Rightmove commercial director commented: “The shock tactic of one unexpected rate rise early in the year appears to have had the desired effect. February price rises are normally two to three times higher than we have measured this month.”

“With three interest rate rises in the last six months and the looming threat of another, it looks like we have finally reached the point where the market is highly interest rate sensitive. We are at a crossroads, and the path taken by those in charge of interest rate policy will dictate the direction of the housing market in 2007”.

Only 78pc of people now believe prices will continue to rise compared to 84pc in December. Buyer confidence was found to be far lower than that of sellers, prompting concern that the market could be set for a downward turn.