House prices will continue to rise next year, although the pace of growth will slow, the estate agency arm of Bradford and Bingley said on Friday.

The estate agents predicted that prices will rise by between three and five per cent next year.

The increase contrasts with a rise of 10 per cent seen over the course of the last year.

The announcement comes as experts predict that low inflation combined with fears over a slowdown could lead to further a reduction in interest rates early in the New Year.

Mortgage rates have fallen to a 40-year low and lenders are reporting buoyant lending despite the events of September 11.

Peter Barrett, the managing director at Bradford and Bingley Estate Agents, said: "We are confident that we will not see a widespread falling back of value. In fact, with sellers remaining realistic about asking prices, our view is that it remains a good time to enter the housing market."