The average UK house price fell by 1.1% in February, the largest annual fall since 2012, according to the latest Nationwide House Price Index.

This also marks the first time that annual house price growth has slipped into negative territory since June 2020.

Nationwide’s figures also showed that February saw a further monthly price fall, by 0.5%, which was the sixth monthly drop in a row and leaves prices 3.7% below their August peak after taking account of seasonal effects.

The average UK house price now stands at £257,406, which is down from £258,297 in January.

Nationwide chief economist, Robert Gardner, suggested 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,” Gardner commented.

“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.”

He added: “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.

“It will be hard for the market to regain much momentum in the near-term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.”

Commenting on the latest Nationwide figures, head of personal finance at Hargreaves Lansdown, Sarah Coles, added: “While mortgage rates are still expected to fall this year, it’s not going to be a straight line. Recent spending and wage figures are raising the spectre of higher inflation lasting longer than had been expected. This would mean the Bank of England pushes rates up further – making mortgages more expensive.

“The market was pricing in a 0.25% rise later this month, but now it has started pricing in a 0.5% rise, so some of the most competitive fixed rate mortgages have been pulled, and some lenders are repricing higher. This doesn’t mean the mortgage market has changed direction completely, but even a small blip is likely to take a toll on the fragile confidence of buyers.

“This is combined with the depressing effect of a stagnating economy and the threat of recession. Buyers who are worried about rising prices and the risk of losing their jobs may well decide that this is the wrong time to take on a huge mortgage and make themselves a hostage to rising rates.”

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