House prices fell by 1% during the early summer as more vendors finally start to adjust the price of their property to suit current market conditions, according Rightmove.

Research shows that nearly £2,000 was knocked off the average asking price of properties in England and Wales during the four weeks to 9 July. The fall caused annual house price inflation to drop to just 0.2%, its lowest level for 10 years, and well down on the 18% that annual growth was running at in July 2004.

Miles Shipside, commercial director of Rightmove, said: Sellers are now realising they have to compromise some degree of their gains in order to sell their properties.

This common sense is a vital step along the road to an orderly recovery of the property market, particularly if combined with an interest rate cut."

Rightmove said average earnings were now rising at a rate of 4.1% a year, well up on the current rate of annual house price growth of 0.2%.