Homebuyers 'knocked off balance

House prices fell for the first time in more than a year during August as buyers responded to three interest rate rises in four months, research showed today.

The Royal Institution of Chartered Surveyors (Rics) said the market had experienced a heavy slowdown since May, as house hunters were "knocked off balance" by the rising cost of borrowing and warnings over a sharp downturn in prices.

But the group stressed it was not expecting a significant slide in the cost of property, as employment remained high and interest rates were still relatively low despite the recent increases.

During August, 12% more chartered surveyors in England, Scotland and Wales said prices had fallen than reported a rise. That compared with 3% more who saw price gains the previous month. An average of 38% of surveyors reported rises in the first half of the year.

At the same time the number of potential buyers registering with estate agents fell for the fourth month in a row, and demand is expected to remain subdued as time goes on.

Rics national housing spokesman, Ian Perry, said: "Some speculation in the housing market is quite gloomy at the moment.

"However, we are confident that a prolonged slide in prices will be avoided, underpinned by the strength of the economy and good employment prospects."

The figures come as lenders reported a slowdown in mortgage advances for August, due to consumers responding to higher interest rates.

At the same time property website Rightmove said house prices eased by less than 0.001% during the four weeks to September 11, following a 2% fall over the previous five weeks.

But while the number of sales agreed during the month continued to fall to its lowest level since November 2000, surveyors are expecting a modest rebound in activity going forward following the traditionally quieter summer months.

Surveyors said the slowdown was forcing sellers to price their homes more realistically, which may enable sales to go ahead.

The market slowed across all regions of the country during August, with the biggest price falls seen in London, the south-east and East Anglia, followed by the south-west.

House price increases remained strongest in Scotland and the north, while there was a rapid slowdown in the North West and Yorkshire and Humberside, and prices remained static in the Midlands and Wales.