Average UK property prices fell by 1.2% in June 2006, according to the Halifax.

The mortgage lender reports that the drop, which followed a fall of 0.1% during May, was the biggest monthly reduction in prices since October 2000.

Martin Ellis of the Halifax said: "The fall suggests the heat is coming out of the market. The strength of demand we saw in the early part of this year is softening. I suspect it is speculation about interest rates and the fact that some of the pent-up demand seems to have been released after the rate cut last year. Other factors that constrain demand are bigger utility bills, the steady upward trend in unemployment and high house prices in relation to earnings across the country."