Annual house price growth has fallen for the first time since June 2020 and is now at its weakest level since November 2012, according to Nationwide.
It comes as Bank of England data also showed a drop in mortgage approvals between December and January, in a day full of warning signs about the health of the property market.
The latest Nationwide House Price Index showed annual house price growth was down 1.1% last month and fell 0.5% on a monthly basis to £257,40.
Robert Gardner, Nationwide's chief economist, said: “The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year.
“While financial market conditions normalised some time ago, housing market activity has remained subdued.
“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.
“Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.
“Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.”
He said it will be hard for the market to regain much momentum in the near term, adding: “Despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay.
“In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the private rented sector, where rents have been rising strongly.”
Gardner suggested conditions should gradually improve if inflation moderates in the coming months as expected, easing pressure on household budgets. Solid gains in nominal incomes together with weak or declining house prices will also support housing affordability, especially if mortgage rates edge lower in the coming months.”
Meanwhile, Bank of England mortgage data yesterday showed approvals fell from 40,540 in December to 39,637 in January.
This figures was also down on the 73,789 seen in January of last year.
Agents remained positive despite the negative data.
Tom Bill, head of UK residential research at Knight Frank, said: “While most of the economy has moved on from the mini-Budget, the hangover is longer for the UK housing market. It has led to a mismatch between the most recent anecdotal evidence and the latest data.
“While last month saw the steepest annual house price decline in more than ten years, activity has been solid so far this year as buyers and sellers adapt to higher mortgage rates. We expect transaction levels to fall from the heights of the pandemic and prices to decline by 5% this year but the UK housing market is far from being on its knees.”
Nathan Emerson, chief executive of agency trade body Propertymark, added: “Despite house prices falling, values are still higher than pre-pandemic.
“Because of this, our member agents recently reported an 80% increase in new sellers entering the market, showing that despite not pulling in as much money from a sale than they would have done last year, sellers still have a healthy appetite to get moving.
“Previously, sellers were able to be more ambitious about the price, but buyers are most certainly now in the driver’s seat and are negotiating hard when hunting for their ideal home.”