Signs that the property market is at last slowing down may be seen in the Nationwide’s monthly review published today.

The average UK house price rose by 0.3% in January - the lowest monthly rise for eight months, said the building society.

The annual rate of inflation stood at 9.3%, a drop into single digits from December's year-on-year rise of 10.5%. The typical cost of a home in the UK during January was £173,225.

Fionnuala Earley, Nationwide's Chief Economist, said: "2007 started off with a bang as the Bank of England raised interest rates for the third time in six months. Only time will tell how much the surprise decision will affect sentiment in the housing market, but even before January's rate rise there were already some very early signs of cooling.”

The slowdown in the rate of house price growth adds to the growing list of cooling indicators. Estate agents reported some easing of demand in December and January, said the review.

The number of newly agreed sales is rising more slowly and the length of time properties are on the market seems to be getting longer. More importantly, new buyer enquiries recorded their first fall in 19 months. While the correlation with mortgage approvals is not perfect, it suggests that the 129,000 house purchase approvals recorded in November may have been the peak. It is likely that we will now begin to see a weakening in demand as a result of stretched affordability and rising interest rates.

 “Of course, prices are determined by supply as well as demand. For now, supply, as measured by new instructions for sale of properties with estate agents, is actually falling more quickly than demand and this puts upward pressure on house prices. As a result, estate agents are still reporting firm house price gains and an expectation of more to come,” Fionnuala Earley said.

“However, eventually the slower demand will ease the rate of house price growth to more sustainable levels,” she added.