Northern Rock’s difficulties will add to the gloom already spreading through parts of the housing market. There are no predictions of sharp price falls, but amid the new higher mortgage bills – which will be one consequence of the problems facing banks – there is expected to be an ebbing away of confidence. Homeowners are likely to be wary of the expense of climbing up the property ladder, which will cause prices to stagnate.

In the first six months of this year house prices in parts of London and the South East, and Northern hot-spots such as Sheffield and Manchester, were up by as much as 16 per cent on last year. Now, overall price growth for the year is likely to drop into single figures. Fionnuala Earley, Nationwide’s chief economist, forecasts a 5 per cent rise, sinking to 3 per cent in 2008. The estate agency Rightmove is reporting that asking prices are down: the average is £235,176, down £6,298 on last month. This is the steepest drop since January 2002. Homes are also taking longer to sell.

Richard Donnell, director of research at Hometrack, a housing data group, said: “We are facing a tricky autumn – people will sit on their hands and prefer not to move.”

Seema Shah, housing economist at Capital Economics, added: “The Northern Rock situation will add to the already heightened state of worry among borrowers about where the current financial market turbulence is going to lead them.”

Mortgages will be more expensive – and very difficult to obtain for those with past debt problems – with lenders themselves finding it more costly to borrow amid the credit crunch. The only location likely to be spared the effects of the repricing of credit will be the most sought-after postcodes of Central London, where many buyers have no need of a loan.

Yolande Barnes, economist at the estate agency Savills, said: “The era of cheap money is over for now.” She said that buy-to-let loans and loans of five to six times earnings could be in short supply.

This new tightening of lending criteria will be the first time that most people are affected directly by the fallout from the US sub-prime mortgage scandal. But, although most commentators expect more cooling in the market’s mood, after downbeat numbers this week from the Royal Institution of Chartered Surveyors and other sources, there is no talk of a slump. The higher cost of home loans is likely to reduce the need for any raising of the Bank of England base rate; previously there were fears of more upward moves in the base rate to suppress the housing market.

Martin Ellis, Halifax’s chief economist, said: “The market remains underpinned by sound fundamentals. The UK economy continues to expand at a robust pace, employment is at a record high and supply is tight. These factors are the drivers of the market and will continue to support house prices.”

For the moment, the capital’s most expensive neighbourhoods seem immune to the surrounding turmoil. Chesterton, which deals with properties of an average price of £1 million, says that demand has increased this month: “There are masses of buyers out there.”

City bonuses are likely to be much reduced as a result of the financial market upheavals but, as Dominic Agace, managing director of the estate agency Winkworth, explains: “Around half of Central London buyers are from overseas, and they will continue to purchase homes.”

Tim Wright, from the Kensington office of Knight Frank, also attests to the continuing clamour for premium houses from international buyers.

Property market cools

-2.6% Asking prices have slipped 2.6 per cent in a month to £235,176, down from £241,474, according to the latest Rightmove survey

9.6% The annual rate of growth is now 9.6 per cent, down from 12.8 per cent just a month ago

-4.1% The biggest fallers are the South West (down 4.1 per cent in a month), the South East (-3.3 per cent) Yorkshire and the Humber (-3.1 per cent). The West Midlands was the only region in which prices increased, up 0.9 per cent)

-41% The introduction of home information packs has caused a slump of 41 per cent in the number of four-bedroom or larger properties for sale, which Rightmove blames on falling prices

-7.8% Prices dropped in every London borough last month except Tower Hamlets (2.5 per cent higher) and Kensington and Chelsea (up 0.7 per cent). The worst performers were Brent (-7.8 per cent) and Camden (-7.7 per cent)

-24% Falling confidence has led to other sellers deserting the market: one and two-bedroom homes are down by 24 per cent and three-bedroom by 15 per cent. 85 days Typically, it now takes more than

85 days to sell a home – up from 70 in May

Source: Rightmove