Britain's biggest mortgage lender has warned house prices are set to stall next year following the global credit crunch and a series of interest rate hikes.

Halifax predicts the housing market will slow during 2008, with total lending falling by up to 6%.

It comes despite experts predicting the Bank of England will cut its base rate at least twice next year.

The mortgage lender estimates a mixed pattern of sales throughout the country for 2008, which could result in flat price growth across the UK.

It also predicts that although the South of England and Scotland are likely to see a house price increase over the next 12 months - with figures rising by up to 4% - areas such as Yorkshire and the Midlands will see a 1% decrease.

The North has proved to be one of the most rapidly developing regions in the country for housing, with prices almost tripling since 1997.

Halifax claims the rate of overall transactions taking place will also drop within the year, with up to 15% less transactions on the housing market in 2008 than in 2007.

The mortgage lender is blaming worsening affordability and a weakening economy for the slowdown and believes that higher interest rates - the result of five increases over the past two years - will continue to hit those coming to the end of fixed-rate mortgage deals.

The group said the figures are a stark warning to the market, and added that although there will be some increases in prices next year, the lack of growth must be seen "in context".

The average house price in 1997 was just £70,000 compared with £195,000 in 2007, Halifax said, and prices across the country have rocketed by 179% in the last decade.

This trend has specifically hit areas such as Northern Ireland, which saw house price growth quadruple in this year alone.

But Halifax added that although housing markets are expected to slow, 2008 could prove to be a good year for savings, with figures increasing by a record £80bn.

The group now estimates that savings next year could reach up to £1.1 trillion across the UK.

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