The residential property market is showing further signs of slowing, as households face a squeeze on their finances.

Halifax reported yesterday that property prices increased last month at the slowest rate of growth since the start of the year.

The average price of a property hit another record of £289,099, up 10.5% year-on-year.

Russell Galley, managing director at Halifax, said: “Despite the very real cost of living pressures some people are experiencing, the imbalance between supply and demand for properties remains the primary reason driving the continued climb in house prices.

“However, the housing market has begun to show signs of cooling. Mortgage activity has started to come down and, coupled with the inflationary pressures currently exerted on household budgets, it’s likely activity will start to slow.”

The Halifax survey accurately reflects what many estate agents are seeing on the ground.

Tom Bill, head of UK residential research at Knight Frank, commented: “House prices have begun their gradual return to earth as the cost of living squeeze tightens, mortgage lenders withdraw their cheapest products and the supply of homes increases as owners sense prices are peaking.

“The trigger for this much-needed rebalancing between supply and demand appears to have been the Bank of England raising the base rate to 1% and the grim language it used to describe the economic outlook.”

But while the brakes will be applied, the low rate of unemployment means the housing market “shouldn’t screech to a halt”, according to Bill, with Knight Frank expecting single digit growth by the end of this year.

Jeremy Leaf, a north London estate agency owner, agrees that cost of living crisis and successive interest rate rises are finally having an impact on the housing market.

“Prices are still rising but not as rapidly as they were just a few months ago and activity is cooling,” he said.

However, Leaf said a major correction seemed “unlikely” owed to the supply-demand imbalance in the market.

Nicky Stevenson, managing director at Fine & Country, commented: “Annual house price momentum may finally be cooling against a backdrop of rising inflation, increased borrowing costs, and war in Europe.

“In this uncertain economic climate, there is a sense that the housing market is at a crossroads, with future gains unlikely to match the huge spikes recorded over the last 12 months.

“While there remains a strong appetite among existing homeowners to trade-up, the supply crunch which has driven record growth in the recent past is slowly starting to ease.

“As the imbalance between supply and demand continues to narrow, annual gains are expected to soften further in the months ahead.”