Economists believe house prices are set to fall further during the coming year despite a shock rise in values during December.

Mortgage lender Halifax said the average cost of a property jumped 1.3% in the month, a move which helps offset some of the falls seen in the previous three months when prices dipped by 2.6% overall.

But experts are predicting the increase is a blip and not a sign that the current downward pressure is easing.

The news comes after figures from the Council of Mortgage Lenders showed the number of new mortgages taken out by home movers fell to a seven-month low in November.

Halifax said 2007 was only the second year since 2001 that property prices had risen by less than the average of 8%.

But it claims this has to be seen in perspective, as values have rocketed 182% in the last 10 years.

The average cost of a home in the UK rose £11,759 during 2007 to reach £197,039.

Halifax chief economist Martin Ellis said: "The housing market continued to slow in the final quarter of 2007 with prices slightly lower than in the preceding quarter.

"Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling real earnings have put pressure on households' income, resulting in a slowdown in both house price growth and activity in recent months."

But he added that the generally sound economy and predicted falls for interest rates will support house prices during 2008.

Howard Archer, chief UK and European economist at Global Insight, said: "The overall evidence still clearly points to the housing market ending 2007 under mounting pressure from increased affordability pressures and tightening lending practices.

"However, the Halifax survey hints that house prices may prove relatively resilient over the coming months, thereby easing concerns that a sharp correction in house prices is looming."

He added that Global Insight still expects house prices to fall by 3% during 2008 as consumers feel the pinch of rising food and household bills.

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