The latest house price index from Nationwide shows a monthly fall of 0.5% in August, the largest decline recorded since July 2012.
This follows monthly growth of 0.7% in July, bringing the average UK property price down to £214,745 last month.
Nationwide also reports that annual house price growth is continuing to soften at 2%, down from 2.5% the previous month.
The lender's chief economist, Robert Gardner, says he still expects house prices to rise by around 1% over the course of this year.
He explains that there is likely to be a 'modest drag' on market activity this year due to 'subdued economic activity and ongoing pressure on household budgets'.
According to north London agent and former RICS residential chairman, Jeremy Leaf, the Nationwide figures confirm much of what agents have been experiencing over the last few months - a market 'softening' further due to expected slowing summer demand.
"However, over the last few weeks have seen more interest in property again which could well transfer into an increase in sales agreed during September and October," says Leaf.
Lucy Pendleton, founder director of James Pendleton estate agents, adds: “With just four months left of 2018, the biggest monthly fall since the London Olympics brings prices dramatically in line with the lender’s forecast for the year."
"Nationwide’s prediction of a 1% increase in 2018 would mean prices finish on just over £213,000, a level not seen since April and only around £1,500 lower than current prices."
"That would undo most of the year’s gains, so if that happens, expect the slowdown to feed into the Brexit mood music as the UK careers toward an uncertain future and possible hard Brexit in early 2019."