The rate of annual house price growth decelerated to 1.1% in January, according to the latest Nationwide House Price Index.

This figure is down from 2.8% in December, after prices fell on a month-by-month basis in January by 0.6%.

Nationwide’s data indicated that the average UK house price now stands at £258,297, which is 3.2% down on the peak in August last year.

The index also highlighted that the fall in house purchase approvals in December, reported yesterday by the Bank of England, largely reflects the sharp decline in mortgage applications following the mini-Budget.

Nationwide chief economist, Robert Gardner, suggested that while there are “encouraging signs” that mortgage rates are normalising, it remains too early to tell whether activity in the housing market has started to recover.

“It will be hard for the market to regain much momentum in the near-term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks,” Gardner said.

“Should recent reductions in mortgage rates continue, this should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth – wage growth is currently running at around 7% in the private sector – especially if combined with weak or negative house price growth.”

Gardner also stated that the overall affordability situation looks set to “remain challenging” in the near-term, adding that saving for a deposit is proving a struggle for many people in the UK amid the rising cost of living.

“High house prices relative to earnings mean deposit requirements remain a major challenge. Moreover, the Help To Buy Equity Loan scheme that helped those with a smaller deposit buy a new build property is due to end in March,” Gardner added.

“However, the government’s mortgage guarantee scheme, which helps to secure the availability and lower the cost of higher loan-to-value mortgages, has been extended until the end of 2023.”

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