UK house prices unexpectedly fell 0.6 per cent in September, the Halifax said on Thursday, the first decline this year and a concrete sign that the housing market is slowing in response to tightening credit conditions.

The Halifax index was well below expectations of a monthly rise of 0.4 per cent. On the quarterly measure watched more closely by policymakers, house price growth has slowed from 2.3 per cent in the second quarter of 2007 to 0.9 per cent in the last three months, while the annual growth rate has fallen to 10.7 per cent.