House price growth slowed to its lowest pace in 18 months during July amid stricter rules for the mortgage market and signs that London property values are topping out.
Hometrack, a property research specialist, said in its housing survey that house prices grew by just 0.1% on average over the month in July. That compares to June's 0.3% and May's 0.5%.
Mortgage demand has been weighed down by the Bank of England and Financial Conduct Authority (FCA), which have both moved to tighten the market.
And the rapid expansion of prices in London appears to be hitting its peak, as property values run far ahead of incomes in the city.
"Seasonal factors always lead to a slowdown in demand and market activity in the summer months, but it is clear that there are bigger forces at work with a pronounced loss of momentum in the London housing market in the last three months," said Richard Donnell, director of research at Hometrack.
House prices have rocketed as the economy recovers and mortgages are cheap thanks to the Bank of England's record-low 0.5% base rate. The Office for National Statistics (ONS) said the average UK house price jumped 10.5% in the year to May 2014, hitting £262,000.
But policymakers and regulators are worried that some individuals may take on more debt than they can afford in the longer-term when rates rise again. This is because they need bigger mortgages to pay for the higher property prices.
The FCA imposed tougher affordability tests on the mortgage market in April. This forces lenders to be more diligent about who they approve loans for by making sure the borrower can afford the repayments in a number of different scenarios, such as higher interest rates.
And the Bank of England put an electric fence around the market. From October 2014, banks will only be allowed to make up 15% of their new mortgage lending with loans worth 4.5 times or more the applicant's income.
There are also signs that the London housing market is topping out. ONS data shows the average house price in the city hitting £492,000 in the year to May 2014 after leaping 20.1%.
Many Londoners are already priced out of the market, a group growing every month. This lack of affordable homes is increasingly weighing on demand. And the supply of properties coming onto the London market is increasing as more people decide to cash in on recent gains by selling up and quitting the city.
"House prices were unchanged in London over the month, the lowest monthly change for 19 months," said Hometrack's Donnell.
"Just 12% of markets registered a price rise in July with 11% of London markets registering lower prices.
"This is the first time in four years that London, which has long been the engine of the housing market, has a smaller proportion of markets registering price gains than in the regions."