House prices rose by 1.3% last month, the first rise over the past four months.

But price growth over the whole of last year was at its slowest rate since 1996.

The Halifax bank, the country’s largest mortgage lender, said that generally, the market has been going through a sharp slowdown due to the impact of higher interest rates.

‘This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market,’ says Martin Ellis, chief economist at the Halifax.

‘Overall, the housing market continued to slow in the final quarter of 2007 with prices slightly lower than in the preceding quarter,’ he added.

The lender predicts that house prices will slow down even more over the coming year.

It anticipates them to be flat over 2008 and that the Bank of England will cut interest rates twice during the next 12 months in response to the slowdown in the wider economy.

Although the Bank cut interest rates last month, the housing market has been reacting to a series of previous rate rises that started in the summer of 2006.

These cuts, combined with the increasing unaffordability of homes, have started to choke demand in the housing market by excluding many first-time buyers.

There were only 300,000 first-time buyers last year, the lowest level since 1980.