Halifax, Britain’s biggest mortgage lender, today said higher interest rates were beginning to put the brakes on the housing market despite the average sale price of a new home hitting almost £200,000 in August.

House prices rose by 0.4 per cent last month — to an average of £199,770 — with annual price inflation at 11.4 per cent.

But Halifax said that while the market remained “robust” there were clear signs of a slowdown given the increasing strain on homebuyers’ budgets as the five increases in interest rates since last year begin to take effect.

During the three months to August, house prices rose by just 1.6 per cent compared to an increase of 4.5 per cent in the three months to March.

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The Times reported today that mortgage payments are making up the biggest share of take-home pay for 17 years.

The Royal Institution of Chartered Surveyors warned that first-time buyers must spend almost five times more than a decade ago to get on the property ladder

Halifax said today that affordability was a key reason why the rate of house price inflation had already fallen sharply over the summer. It added that rising food prices would reduce householders' disposable incomes.

The figures will add further weight to those urging the Bank of England to leave interest rates on hold when they set the cost of borrowing for September tomorrow.

Rates have increased five times since August last year to 5.75 per cent, adding nearly £150 to the typical repayments on a £200,000 home loan.

Martin Ellis, Halifax chief economist, said: “Whilst the market remains robust, this provides further evidence that house price inflation has slowed since the beginning of the year.

“The downward trend in house price growth is expected to continue over the remainder of 2007 as the five interest rate rises since last summer have an increasing impact of household spending and housing demand.”

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