House prices fell by 0.3% in February, putting the annual rate of inflation at 4.2% down from 4.5% said the lender. The average house price in the UK is now £196,649, with prices in the three months to February actually rising by 0.2%.

Halifax continues to predict a flat 2008 for the housing market as a whole, although it says sound economic fundamentals, like employment, remain strong supporting a gentle progression rather than any sudden rises or falls.

Lower interest rates are also easing the pressure on house prices, and the report estimates that the Bank of England will cut interest rates a further two times by the end of the year.

However, Halifax also took the opportunity to point out that stamp duty is a major expense for homebuyers, as the thresholds for levels of payment haven’t increased in line with house price inflation: ‘The average stamp duty bill was worth more than 20% of average full-time earnings in 91% of London local authorities and 61% in the south east,’ the report points out.

However, some property economists fear that a weakening economy in coming months may contribute to further negative results for the market as the year goes on: ‘Overall, today’s figures are consistent with our view that a short sharp shock is less likely than a protracted correction, as sellers initially resist pressures to lower their prices.

‘Nevertheless, the housing market faces strong headwinds. Lending criteria are still being tightened and, while the MPC will cut interest rates further, the credit squeeze will mean that mortgage interest rates fall less quickly than base rates. Moreover, we expect both economic growth and the labour market to showing increasing signs of weakness. As a result, we also expect the next four or five months to bring evidence that the house price correction is gathering momentum.’