House prices fell slightly during the second week of June, suggesting the booming property market could finally be slowing down, figures showed today.

Property web site Rightmove said the average cost of a home in England and Wales dipped by 0.4 per cent, or £683, during the week as consumers began to feel the four hikes in interest rates.

The group said the figures suggested the market was entering the long-expected slowdown, as a rise in the cost of borrowing combined with the hot weather and Euro 2004 distracted people from house buying and helped curb demand.

At the same time, it said the supply of property coming on to the market was up by about ten per cent.

But despite the drop, for the five weeks to June 12 house prices rose by 2.6 per cent to an average £193,965, while annual house price inflation rose to 17.2 per cent from 15.6 per cent a month ago - the highest rate since April last year.

Miles Shipside, commercial director of Rightmove, said: "Over the month, prices are up again but close analysis provides evidence the market may have turned.

"The impact of four interest rate rises, including two on the bounce in April and May, is beginning to bite.

"Right up until the end of May the boom continued unabated but, come June, the market seems to have turned and we've seen the first price falls since the usual seasonal slowdown last Christmas."

He said the slowdown was starting in London and spreading out, with prices in the South-East down by 0.7 per cent during the second week of June.

But with interest rates remaining low and confidence high, the slowdown was likely to be steady and gradual, rather than sudden and dramatic.

Monday June 21, 2004