Britain’s biggest mortgage lender today cautioned that the housing market was beginning to slow despite seeing prices rise by an average of £121 a day last month.

Halifax said that while house price inflation was 1.8 per cent in February - the strongest monthly rate since October - growth on a quarterly basis had halved.

Martin Ellis, Halifax chief economist, said: “There are some signs emerging that the increase in interest rates since last summer is dampening housing demand.”

He added that the increasing pressure on household budgets from council tax rises and low pay deals would see a “gradual slowdown” in house prices later this year.

The figures came just hours before the Bank of England was due to announce interest rates for March.

Economic experts expect the cost of borrowing to remain unchanged at 5.25 per cent after three increases since August last summer.

Halifax said that house prices averaged £192,233 across the UK after February’s rise, with the annual rate of inflation running at 9.9 per cent for the third month in a row.

But over the three months to the end of February, house prices climbed by just 2.3 per cent, against 4.7 per cent in the previous quarter.

Despite the signs of a slowdown, economists in the City said that the figures reflected a resilience in the property market. Recent rival surveys have shown a drop in buyer inquiries and mortgage approvals.

Philip Shaw, the chief economist at Investec, said: “The report is actually stronger than we expected, but it’s fair to say the housing market is cooling.”

Halifax said that part of the residual strength in the housing market was down to tight supply. Just 160,000 new homes were built in the UK last year, well short of the 200,000 annual target.

“This is continuing to exert upward pressure on house prices, particularly in London,” it said.

Separately, Halifax reiterated its call on Chancellor Gordon Brown to raise stamp duty and inheritance tax thresholds in the forthcoming Budget. It said that property taxes in the UK were the highest among OECD countries at 12 per cent of total taxes.

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