House price growth stayed flat in May at 0.0% as the rate of annual growth fell into negative territory, according to the latest Halifax House Price Index.

The latest monthly figure followed a fall in April (-0.4%), while the latest annual rate was down from 0.1% in April.

Halifax’s data has suggested this is the first annual decline in house prices since December 2012 (-0.1%), to leave a typical UK property at an average cost of £286,532 in May, down £130 compared to April.

Director at Halifax Mortgages, Kim Kinnaird, suggested the flat month indicates that the annual decline largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer.

“Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August,” Kinnaird said. “But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.

“As expected, the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end.”

Kinnaird also warned that with consumer price inflation remaining “stubbornly high”, with the latest figure from the Office for National Statistics revealing an 8.7% increase in prices in the year to April, markets are pricing in “several more rate rises” that would take the Bank of England base rate above 5% for the first time since the start of 2008.

“Those expectations have led fixed mortgage rates to start rising again across the market,” Kinnaird added.

“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore, further downward pressure on house prices is still expected.

“One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained.”

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