House price inflation has fallen below wage increases for the first time this decade according to Rightmove’s latest monthly survey which shows asking prices for houses edged up 0.2% on the month before to stand 2.4% higher than a year earlier, down from 4.9% in May and the lowest this decade. They go on to predict that the house price increase figure will soon fall to zero.

“This year’s traditional spring bounce in asking prices has ground to a halt. Sellers have belatedly realised that buyers are unwilling or unable to pay ever-increasing prices,” said Miles Shipside, Rightmove’s commercial director.

First-time buyers – the main prop of the property market – remain priced out, Mr Shipside said, adding that at current rates of pay rises, it would take seven years for the “affordability gap” to be closed, assuming house prices don’t fall.

A growing number of City economists think that the slowdown in house prices over the past year, combined with a sharp drop in consumer spending, could soon provoke the Bank of England’s monetary policy committee to cut interest rates, for fear of a much steeper fall.

The slowdown in the housing market is particularly acute in London, where prices are the most expensive. Asking prices fell 0.7% on the month, reversing May’s 0.7% rise, while the annual change showed a fall of 3.1%, the second consecutive drop.

Economists are divided as to whether the housing market, which has seen prices triple in the past eight years, will remain stagnant while average earnings catch up, or fall sharply. The first is wishful thinking.

Some – like the Halifax and Nationwide – think that when most of the big house price indices fall to zero this autumn, the market could suffer a serious blow. The Bank’s governor, Mervyn King, has admitted that the monetary policy committee has been surprised at the speed with which consumer spending has slowed this year and that the link between house prices and consumption may be stronger than the MPC had thought. Who would have thought it, when mortgage repayments increase, and house values fall people spend less money in the shops. And these geniuses are supposed to be ‘overseeing’ the economy!