Oct. 1 (Bloomberg) -- U.K. house prices were unchanged for a second month in September, suggesting five interest-rate increases in the past year and turmoil in financial markets have rattled buyers' confidence, Hometrack Ltd. said.

The average cost of a home in England and Wales was unchanged in September at 176,300 pounds ($358,000) from a month earlier, according to a survey by the London-based research group published today. London and the southeast of England were the only regions to show gains, with prices rising 0.1 percent in both areas.

The U.K.'s decade-long property boom is cooling as a credit-market slump threatens to raise the burden on Britons already shouldering a record 1.3 trillion pounds in debt. Higher credit costs forced mortgage lender Northern Rock Plc to ask the Bank of England for emergency funding last month, leading to the first run on a British bank in more than a century.

``Turmoil in the financial markets has created a period of inertia in the housing market, with buyers and sellers unwilling to commit until the outlook becomes clearer,'' Richard Donnell, Hometrack's director of research, said in the report today. ``Demand and sales volumes look set to remain weak over the rest of the year.''

From a year earlier, U.K. house prices climbed 5 percent in September, down from 5.4 percent in August, Hometrack says.

Slower Growth

Today's report adds to evidence that house-price growth is slowing. Rightmove Plc, Britain's biggest real-estate Web site, said Sept. 14 that asking prices fell 2.6 percent in September, with London values falling the most since 2004. The Royal Institution of Chartered Surveyors said a day earlier that U.K. house prices fell for the first time since 2005 in August.

Banks approved the fewest mortgages for house purchase in four months in August, a separate report from the Bank of England showed today. Lenders granted 109,000 loans, down from 115,000 in July.

U.K. consumer confidence fell to the lowest in six months in September after the run on Northern Rock, GfK NOP Ltd. said Sept. 28. Only a government guarantee ended the panic, which led former policy maker Richard Lambert to liken Britain to a ``banana republic'' in a Sept. 26 speech.

A shortage of properties is nevertheless still supporting prices. Nationwide Building Society, the nation's fourth-biggest mortgage lender, said Sept. 27 the average cost of a home rose 0.7 percent last month, more than the 0.3 percent forecast by economists in a Bloomberg News survey.

`Tightening' Supply

``There are no signs of an increase in new supply,'' said Donnell. ``If anything, there appears to be a tightening in supply in the face of greater uncertainty.''

The Bank of England left interest rates unchanged at a six- year high of 5.75 percent last month to gauge the effect of the credit squeeze on inflation and economic growth. The fallout may mean that policy makers have finished their series of rate increases to tame consumer prices.

All but one of the 60 economists in a Bloomberg News survey expect the Bank of England to keep its benchmark rate at 5.75 percent on Oct. 4.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Last Updated: October 1, 2007 05:52 EDT