LONDON (Reuters) - Annual house price inflation in England and Wales fell to its lowest in 1-1/2 years in December as prices suffered their biggest monthly decline in nearly two years, a survey shows.

Property consultant Hometrack said house prices were 3.0 percent higher than a year ago, the lowest rate of growth since June 2006.

Month-on-month, prices fell 0.3 percent on an unadjusted basis, the sharpest drop since January 2005, reflecting house price falls in 30 percent of the country.

And in a further sign the housing market is rapidly cooling, the average time a property stayed on the market rose to 8.3 weeks, the longest since the survey began in 2001.

The number of new buyers registering with estate agents fell 7.9 percent.

Hometrack said higher interest rates and worries about financial market turmoil were weighing on the market, particularly in southern England, which has enjoyed booming house prices in recent years.

And the Bank of England's quarter-point rate cut this month has done little to help.

"Despite the recent cut in interest rates levels of market activity are likely to remain subdued over the course of 2008, especially over the first half of the year," said Richard Donnell, Hometrack's director of research.

Donnell reckons average house prices will rise by just 1 percent over 2008. That compares with growth of 3 percent this year, just half that recorded over 2006.

"Lower interest rates and continued growth in household incomes will help to ease the affordability pressures but it is a trend that will need to run for a good 12-18 months," he said.