A MORTGAGE "famine" could be slowing the recovery of the housing market as asking prices for homes in the region slipped back last month, figures have shown.

The average asking price of a property in the seven-county South West fell by about £1,500 in the four weeks to June 9 to stand at £244,511, said property website Rightmove.

This compared with a rise of 4.6 per cent, or close to £6,000, in the previous month as all-time low interest rates and falling house prices tempted buyers back to the market.

But Rightmove said house prices were on average 6 per cent higher than they were at the turn of the year, fuelled by a short supply of good property and the "equity-rich calling the bottom of the market".

Miles Shipside, commercial director of Rightmove, urged caution over recent reports from estate agents claiming interest from possible buyers was growing appreciably.

He said: "It's a mistake to confuse the upturn in inquiries and sales with a return to a more normal market.

"While conditions are much improved on the darkest days of last year, we are now starting to see some big distortions and wild swings due to the combined effects of recession and restricted mortgage availability.

"As the best deals on property and mortgages are only open to the equity-rich, the new stock that agents are looking to attract has to match what these purchasers want to buy and can afford.

"Perennially popular areas with good schooling are in, while flats in large blocks and terraces requiring major works are out, meaning new sellers are having to adjust prices accordingly."

He warned mortgage lenders risked "choking off the recovery" by ramping up interest rates, as many appeared to be doing. According to Rightmove, new sellers raised their valuation in Truro (6.4 per cent), Yeovil (4.3 per cent), Exeter (3.1 per cent) and Taunton (0.3 per cent).

Meanwhile, asking prices fell by 4 per cent in Penzance, 1.6 per cent in Torquay and 1.1 per cent in Plymouth. The annual fall in asking prices in the South West eased, but remained 5.5 per cent down on the same period last year.

Earlier this month, figures from the Land Registry's House Price Index suggested property prices in the Westcountry were finally levelling off.

While the region reported an 18 per cent year-on-year slump in prices to May, estate agents pointed to April's monthly figure where change hovered around zero for Cornwall, Devon and Somerset.

The Nationwide Building Society earlier said prices rose by 1.2 per cent during May as buyers continued to return to the market.