House prices edged up by just 0.1 per cent in June, taking the annual rate of price increases to its lowest level for more than four years, according to the latest monthly survey by mortgage lender the Halifax.

In the latest evidence of stalling home prices amid a slip in consumer confidence and evidence of an economic slowdown, the Halifax said house prices have been "static" for the first six months of the year.

The lender said annual house price growth had now fallen to 3.7 per cent, the lowest level since March 2001. It means that price growth is below the annual average growth in earnings, which is 4.6 per cent.

Halifax insisted that the economic fundamentals underpinning the housing market are still "sound". "Earnings growth is robust. The UK economy continues to grow with employment reaching another record high of 28.58 million people employed. Mortgage payments are very close to their long-term historical average as a proportion of income for new borrowers," the mortgage lender said.

"Housing market activity has stabilised with some signs of improvement in recent months. The number of loans approved for house purchase increased for the fifth successive month in May and Halifax Estate Agents has seen a steady level of sales since February."

But the survey, released ahead of today's decision on interest rates by the Bank of England, is unlikely to reassure nervous homebuyers worried about the direction of the economy.

Howard Archer, chief UK economist at Global Insight, said: "We continue to believe the housing market will see an extended period of relatively subdued activity and soft prices rather than undergo a sharp correction. Buyer affordability will benefit from annual house price inflation falling below annual earnings growth, while interest rates seem set to fall shortly (if not today).

"Meanwhile, sellers are likely to remain reluctant to drop their prices significantly, given that very few of them are currently having to sell for 'distressed' reasons. Nevertheless, the risk of a sharp housing market correction would increase should the economy slow markedly for an extended period and unemployment start to rise significantly."

The Halifax said the gap between average house prices in the north and south of England had shrunk by £10,000 over the past 12 months, although it said the "north-south divide" in property prices still persists. Prices in the south were £80,000 higher than in the north during the second quarter.

House prices actually fell in some regions during this period - in East Anglia (1.6 per cent), the south east (1.2 per cent) and greater London (1.1 per cent). At the same time, there were some substantial price rises, with the biggest gainers in Wales, at 4.2 per cent, and Northern Ireland, at 3.9 per cent, the Halifax said.

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