Brighton and Hove experienced the most dramatic slump in property prices in Britain last month, according to latest figures.

A combination of rising interest rates, investor caution and the poor summer have contributed to a 1.9 per cent fall in the price of the average home.

This is the second consecutive month values have fallen, signalling the end to a 12-year boom which has seen prices double since 1992.

A detached house previously worth £322,000 had £6,400 wiped off its market value in July.

Owners of flats and maisonettes, which have an average selling price of £144,000, saw the price fall by £2,736.

Interest rate rises have been blamed for the national 0.1 per cent slump in prices but Brighton and Hove has been most severely affected.

It heads the league table of falling house prices, followed by Reading and Exeter at 1.2 per cent and Oxford at one per cent.

In London the average home lost 0.8 per cent of its value.

East Sussex as a whole fared only slightly better with a 0.7 per cent fall. West Sussex was unaffected.

John Wriglesworth, housing economist for internet site Hometrack, which calculated today's figures, said: "Rising interest rates and speculative fears of a housing market crash have resulted in falls in house prices across many parts of the country. The reason Brighton and Hove has seen the biggest fall is because it was one of the star risers over the last two years.

"It has become a hugely popular place to live but there is a new cautious consumer approach following interest rate rises.

"We anticipate that a ripple of negative price changes will spread out over wider regions of the UK, as the full effect of the most recent interest rate rises has not yet fed through to the market.

"House prices have only risen by 3.6 per cent so far this year and we feel that the market is now approaching its peak."

He said a market crash was not expected but prices would continue to level out with zero per cent inflation for at least the next 12 months.

Ben Tseliki, negotiator at Brighton estate agency Graves, Son and Pilcher, said poor weather meant fewer potential buyers had visited the city this year.

He said: "We usually have a lot of people coming down on holiday and deciding to move here.

"This has been a non-existent summer so there have been fewer people coming down.

"The market has peaked without a shadow of a doubt but prices are levelling out rather than reducing.

"People have been saying the market will crash for two years but I do not feel it will be anything as sudden as that."

The report also reveals that the number of first-time buyers nationally fell by four per cent, wiping out demand.

Interest rates have increased by 1.25 per cent since November last year, pushing up the cost of mortgages.

Experts warn predicted future interest rate rises imposed by the Bank of England could lead to continued falls in the housing market.