House price growth is set to decline further in 2008, new figures from Nationwide have revealed.

According to the firm, house price inflation will fall to zero per cent from its current level of 9.7 per cent as buyers become more cautious in the wake of recent economic turmoil and increasing interest rates.

Fionnuala Earley, Nationwide''s chief economist, explained: "A slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity."

The UK has seen sharp price growth in recent years, with Halifax pointing out that the average price of a home now stands at £198,898, a 10.7 per cent increase in the last year alone.

Ms Earley added that although some homeowners would be disappointed if the value of their home did not increase in 2008 as it has done in the past, it is important to put the situation into context.

"From a longer-term perspective, a year of flat house prices will contribute more to the future stability of the market than a year of ten per cent inflation and ever worse affordability," she said.

She concluded: "Now may well be a good time for price growth to pause for breath."