Further evidence that the housing market is beginning to cool was revealed today by the Royal Institute of Chartered Surveyors (Rics). Its surveyors reported that prices rose at their slowest pace for more four months in December and this slowdown is expected to continue as the recent interest rate increases begin to bite.

Ian Parry at Rics said: "Interest rate rises have started to cool the housing market and last week’s rise will have a further impact in the coming months."

Rics’ survey supports the latest Halifax figures, which also pointed to a cooling market. Halifax found that prices fell by an average of 1% last month, but because the rate of growth had been so strong throughout the year, the bank said it was too early to call the end of the boom. The value of the average house rose 9.9 per cent in 2006. However, if the early indications are right, and higher interest rates are now beginning to take effect, we should see other institutions reporting similar data going forward.

Kelvin Davidson at Capital economics, a consultancy, said: "We believe that the negative impacts of higher interest rates will become gradually clearer as the year progresses, with market activity levels and price pressures likely to weaken substantially over 2007."

A weaker housing market will be great news for those trying to get onto the property ladder. Rising property prices are taking their toll – the average first time buyer had to borrow 3.29 times their income in November, in order to buy a home, according to new figures from the Council of Mortgage Lenders (CML). This is a record high, up from 3.27 times in October and 3.08 in November 2005.

Michael Coogan, director general at the CML, said: "Month on month we see affordability constraints becoming more pronounced for first time buyers."

A slowdown in the rate of growth will therefore be welcomed. If house prices aren’t racing away, it gives first time buyers more time to save a deposit without the fear that they will be priced out of the market.

However, on the flip-side rising interest rates mean the cost of borrowing is higher. Anyone stretching themselves to get a mortgage is advised to go for a fixed rate loan as this gives protection from further rate hikes, but they need to act quickly in order to take advantage of the few remaining two-year deals below 5%.

A number of lenders, including Abbey, Portman and Skipton building societies, have pulled their fixed rate mortgages over the last few days, and replaced them with more expensive deals. Other lenders are expected to follow suite.

Nationwide has a two year fix at 4.84 per cent for purchases and 4.94 per cent for remortgages, although broker say that they have heard rumours that these deals will not be around for much longer. You can fix for two years at 4.95 per cent with ING Direct and both Yorkshire and Principality building societies have two year fixes at 4.99 per cent.

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