House prices in the UK fell for the second successive month at the start of the year, pulling annual growth to its lowest level since June last year.
The 0.6 per cent fall in house prices reported by Halifax came as a surprise to analysts, who had expected the index to edge up in January. Prices also fell by 0.6 per cent in December.
Prices have still risen by 2.2 per cent in the last year, according to the Halifax index, although that remains a significant slowdown from the 2.7 per cent price annual growth seen in December.
The quarter-on-quarter trend showed house prices completely flat, with an average price of £223,285 in January.
Russell Galley, managing director of Halifax Community Bank, said: “Although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages."
The figures may give further pause to the Bank of England, which raised interest rates for the first time in a decade in November – although separate data from rival mortgage lender Nationwide this month showed an acceleration in price growth.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics,said: "House prices likely will remain weak in the first half of 2018, given that both the recent rise in bond yields and the imminent winding-up of the Term Funding Scheme suggest that mortgage rates will rise further."
However, mortgage rates remain near historically low levels, and the shortage of new housing stock remains acute, which will likely provide support for prices, despite widespread concerns over affordability.
Jonathan Samuels, chief executive of property lender Octane Capital, said: "High inflation and low economic visibility amid ongoing Brexit negotiations are holding the property market to ransom.
"While the lack of supply and low borrowing costs rule out a material deterioration in prices, the cost of living and caution around the UK’s exit from the EU are starting to get the upper hand.