Tighter credit conditions are slowing activity in the housing market and forcing prices down, according to the governor of the Bank of England.

In the Bank''s latest inflation report, Mervyn King said indicators of housing investment point to a significant slowdown in the market.

He noted that companies have scaled back plans to invest in the industry as the credit crunch bites.

Mr King added: "The continued adjustment of banks'' balance sheets has resulted in a monetary squeeze."

"The impact of this is very clear in residential and commercial property markets where activity has slowed as prices have fallen," he stated.

According to the Bank, the rise in inflation, which hit 4.4 per cent in July, is expected to continue reaching a peak of around five per cent in the next few months.

Coupled with the increase in cost of food and energy, consumer spending and house prices are likely to weaken together, it said.

Carry out a house price search.