Although prices remained flat in May compared to April, the annual rate of growth fell to -1.0%, the first time this rate has fallen in 11 years.
Kim Kinnaird, director of Halifax Mortgages said: ““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. 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.”
Regional variationsAll areas of the UK, except for Wales, have seen annual house price growth weaken in May compared to April. Annual price growth in Wales remained unchanged at 1.1% in May, with the average price of a property there at £218,365.
The best performing region in May was the West Midlands, with annual price growth at 2.7%, followed by Yorkshire and Humberside, with annual growth at 2.3%.
Southern England fared less well, with annual price growth down by -1.6% in the South East and -1.4% in the South West. Prices in the capital were down by -1.2% over the last year.
Property prices outlookThe outlook for the property market remains uncertain, particularly given higher than expected inflation figures in the year to April.
Ms Kinnaird said: “With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take 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.
“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.