House price growth in the eurozone is slowing and could act as a brake on the region’s economies.

Barclays Capital predicts that average house prices will rise by just 4.3% in 2007, the slowest rise since 1999.

In Spain and France there has been a marked deceleration, and in Ireland annual growth is likely to come to a near-standstill this year.

European Central Bank interest rates have risen from 2% at the end of 2005 to 4%, and Spain and Ireland have proved particularly sensitive to these changes, as variable rate mortgages are common in both countries.

Barclays Capital warned that recent stock market turmoil, which has driven up borrowing costs across Europe, meant that the eurozone housing market could face further weakness.