House prices are still rising, but there is mounting evidence that the market is slowing, according to the Halifax.

The UK's biggest mortgage lender said prices increased by just 0.4% in April, continuing this year's slowdown in house price growth. In March prices grew by 1.1%.

One reason for the slowdown was that more properties had come onto the market and that had kept prices down.

The bank said a marked decline in the number of first-time buyers had also had an effect.

There will... be a marked north-south divide with the market slowing to a much greater extent in the south Martin Ellis, Halifax chief economist

Chief economist Martin Ellis said many potential homebuyers could not afford to get on the property ladder.

"More properties for sale and lower numbers of first-time buyers should cause house price growth to continue to fall over the remainder of this year," he said.

Halifax is predicting that annual house price inflation will fall from its current level of 23% to 9% at the end of 2003.

Cooling down

Mr Ellis said factors that have contributed to the house price boom are still in place - mortgage rates are at their lowest since the late 1950s, unemployment remains low and mortgage payments account for a lower proportion of a new borrower's income than at any time since 1984, at 15%.

If first-time buyers are already sensing that the market is beginning to slow down then they are likely to postpone taking their first step onto the ladder Capital Economics

But he warned there would be "a marked north-south divide with the market slowing to a much greater extent in the south".

Halifax's findings add to the evidence of a slowdown reported in other recent surveys.

The Nationwide building society said this week that the average price of a home in the UK had remained unchanged in April.

One reason that Halifax reported a rise in prices while Nationwide found they were static might be that Halifax's business is concentrated more heavily in the north while Nationwide is better represented in the south.

The latest study from property analyst Hometrack, which surveys estate agents, found prices in England and Wales had fallen on average.

No impetus

"All the main indicators are now consistent with momentum falling out of the market," said the economics consultancy Capital Economics.

It said Halifax's 0.4% April price increase provided further evidence that the housing market slowdown was gathering pace.

"If first-time buyers are already sensing that the market is beginning to slow down then they are likely to postpone taking their first step onto the ladder.

"Without this impetus at the bottom end of the market owner-occupiers will struggle to move up without putting further downward pressure on prices."