More evidence of the weakening housing market emerged yesterday when figures showed that house prices had fallen by 1% in the three months to January. The Times

Halifax said that the cost of an average home last month was, at £197,244, only £80 more than it had been in December, but the largest mortgage lender in Britain brushed off forecasts of a housing slump this year or next.

Martin Ellis, chief economist at Halifax, said: 'We expect a more subdued market, but we don’t expect any falls in UK house prices on a national level. Some regions may experience slight falls, but these will be balanced by increases in the South of England and Scotland.'

Figures released last week by Nationwide, the second-biggest lender, indicated that house prices had fallen by 0.1% in January, the third consecutive monthly decrease.

Worries over the housing market have spread to Central London, where prices for prime houses and flats in the £1m to £2m bracket were flat, Knight Frank, the estate agent, reported. Prices of Central London property worth up to £1 million rose by only 0.2% in January, while homes priced in the £1 million to £5 million bracket rose by 0.7% as demand fell among bankers with smaller bonuses to spend.