Average house prices fell by their largest level since October 2008 last month, Halifax data shows.
It is the latest sign of a potential property market slowdown.
The latest Halifax House Price Index showed average property values declined by 2.3% between October and November, the third monthly decline in a row.
Annual house price growth slowed from 8.2% to 4.7%, putting average property prices at £285,579.
Kim Kinnaird, director of Halifax Mortgages, said: “While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years – this month’s fall reflects the worst of the market volatility over recent months.
“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.
“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.”
Kinnaird said the market may now be going through a process of normalisation, adding: “While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”
Commenting on the data, Jean Jameson, chief sales officer at Foxtons, said: “December often brings opportunities for buyers to beat the new year rush. Although the market has favoured sellers this year, we may be starting to see the pendulum swing and buyers regain purchasing power as competition falls and prices begin to level out.
“The London market can’t be painted with too broad a brush, however, because some local markets fluctuate more than others.
“Areas with needs-based markets tend to remain consistent as, for instance, families will look for housing in certain catchment areas no matter market conditions. Central London has a high international audience and ultra-high net worth vendors with no urgent need to sell, so it’s also reliably stable. In areas where house prices are decreasing, we may begin to see more activity with first-time buyers.”
Tom Bill, head of UK residential research at Knight Frank, added that there may be more declines to come.
He said: “House prices in November moved sharply in the opposite direction to mortgage rates, which spiked following the mini-Budget.
“The slightly confusing message for buyers and sellers is that mortgage rates should continue to edge down even as the Bank of England raises the base rate. However, even as the financial pain becomes less acute in coming months, we expect it to become more widespread as more favourable mortgage offers made before the mini-Budget lapse.
“This should take house prices back to where they were in the summer of 2021, erasing around half of the 20%+ gain they made during the pandemic.”