The Nationwide building society suggested house prices rose by 0.9% last month, against an average rise of 1.1% over the previous three months.

Nationwide also suggested growth would continue to slow. Its latest figures put annual house price inflation at 19.2% in June, compared with 21.3% the previous month.

But the building society predicted annual growth would fall to 10% for 2003.

Nationwide's figures follow a survey from the property company Hometrack earlier this week which suggested house prices had stagnated in June.

Interest rate boost?

Hometrack said prices were "bumping along the bottom...flat as a pancake."

It said there was more evidence supply was now overtaking demand - meaning sellers were having to drop their asking price.

But Nationwide offered hope that a cut in interest rates would bolster the market and avoid the much-feared crash in prices.

Prices are bumping along the bottom... prices are flat as a pancake John Wrigglesworth, Hometrack Compare Hometrack's latest survey

"The next movement in interest rates is still likely to be down and any rise in unemployment looks modest by historical standards," said Alex Bannister, Nationwide's group economist.

But he cautioned that some areas of the country could be more vulnerable than others.

"A weaker UK labour market will provide a check on house price growth particularly where affordability is stretched."

London weakness

Areas of the country most affected by the slowdown in house price growth were London and the South East, while Yorkshire and Humberside continued its rise.

Average House Prices North �87,082 Yorkshire & Humberside �100,625 East Midlands �115,309 West Midlands �119,674 London �210,958 South West �144,903 Wales �96,455 Scotland �85,086 Northern Ireland �90,265

In London, annual growth slowed sharply to 14.6% in the April to June quarter, down from 23.4% in the previous three month period.

"It is likely that weakening pay and job prospects and worsening affordability will reduce annual growth further in London during the rest of the year," said Mr Bannister.

By contrast, the North West saw average house prices cross the �100,000 mark for the first time and Nationwide is predicting further gains.

The building society is predicting annual growth of between 2% and 5% in London this year, against 15% in the regions and 10% to 15% in the Midlands.

The 'North-South divide' effect echoes Hometrack's suggestion that some areas of the country, led by Cumbria, are continuing to enjoy small prices rises, while house price falls have persisted in the south east and Greater London.

But Hometrack suggested prices were levelling out across the board.

The firm's housing economist John Wrigglesworth said the south had seen a reduction in the rate prices were falling, while the north had seen a slowdown in the rate of increase.

"House price stagnation is now more prevalent," he added.