Faltering house prices staged a pre-Christmas fightback, rebounding sharply last month after falling for the previous three months in a row, the latest snapshot of the property market from Halifax suggested yesterday.

The nation’s biggest mortgage lender said that average national house prices, based on its loans to homebuyers, jumped by 1.3 per cent during December. The last-minute rally reversed the 1.3 per cent slump in prices that Halifax’s figures show took place in November, and also followed reported declines of 0.7 per cent in October, and 0.6 per cent in September.

The December bounce left prices only modestly lower, by 0.8 per cent, over the final quarter of last year as a whole. The falls in prices suffered in the closing months of last year were still enough, however, to cut the annual pace of house price inflation sharply, to its lowest for two years - leaving little doubt over the continued weakening trend in the market.

Home values in the final quarter of 2007 were only 5.2 per cent higher than in the same period in 2006. That marked an abrupt decline from the double-digit pace of increase seen during the autumn, when house price inflation peaked at 11.4 per cent. 2007 as a whole also marked only the second year since 2001 when house prices have risen by less than the long-term average of 8 per cent.

Halifax’s data shows that British house prices climbed by an average of £11,759 last year, to £197,03, but have still soared by 182 per cent over the past decade - almost trebling from £70,000 at the end of 1997 soon after Labour came to power.

The better than expected December figures may still ease pressure on the Bank of England to deliver a further quarter-point cut in interest rates tomorrow, on the heels of last month’s reduction, amid fears that the sliding property market will undercut consumer spending and broader economic growth.

But Halifax gave warning that December’s price bounce did not signal that worries over the housing market outlook can be dismissed. It renewed its prediction that prices will remain flat, on average, for this year as a whole. Halifax said a mixed pattern of monthly rises and falls in prices, as seen at the end of last year, a typical sign of the housing market becoming subdued. At the time of the last significant slowdown, between July 2004 and the following summer, Halifax’s figures had shown six monthly falls in prices, and six increases. A similar pattern was also seen during 2000.

Some economists also raised doubts over the Halifax figures, contrasting its report of a steep rise in home values in December with the findings of Nationwide that prices fell by 0.5 per cent in December.

A further slide in approvals of new mortgages for homebuyers also added to evidence yesterday that the market continues to cool. The value of new home loans agreed by lenders, seen as a key barometer of market trends, fell in November to its lowest for seven months, at £12.2 billion, the Council of Mortgage Lenders reported. The number of loans agreed also dropped by 3.1 per cent to 80,000.

The decline in approvals of loans for housebuyers was accompanied by an even sharper drop in loans agreed for remortgaging, so that total mortgage lending in November was sharply lower, by 10 per cent from the level a year before, at some £30 billion, the CML said. However, Michael Coogan, its director-general, said that business activity in the mortgage market was holding up “reasonably well”, despite the pressure on lending conditions from the impact of the credit squeeze on institutions’ funding.