House prices increased by 0.7% in July, according to latest figures from the Halifax, making it the fourth consecutive month that house prices have grown by less then 1.0%, which confirms that house prices are slowing, according to the mortgage lender.

In the three months from April to July prices rose by just 1.3% – the smallest rise per quarter since August 2006 – while new buyer interest fell for the seventh consecutive month in June, says the report.

However, Halifax maintains that a healthy economy and a strong labour market continue to underpin housing demand, as the UK economy recorded an unprecedented 60th consecutive quarter of rising activity this year.

These figures have led Halifax to revise its house price growth forecast for 2007 from 4% at the start of the year to 6%, to reflect the greater upward movement than expected in the first four months of the year.

‘We expect the downward trend in house price growth to continue as the five interest rate rises since last summer have an increasing impact in household spending and housing demand,’ said Martin Ellis, chief economist at the Halifax. ‘Sound economic fundamentals, high levels of employment and a shortage in the number of properties available for sale, particularly in London and the South East, will, however, continue to support house prices.’