Nationwide’s latest monthly survey revealed that prices fell by 1 per cent to £161,320 during the month following a 1.4 per cent rise in January – the largest for five months.
Economists warned that although the month-by-month figures are volatile, the three-month view shows that price increases have slowed significantly. This dropped to 1.6 per cent for the three months to February, down from 2 per cent in January and a peak of 3.7 per cent in September.
They say the slowdown in mortgage lending and the end of the temporary rise of the stamp duty threshold to £175,000 are also having an effect.
However, on an annual basis, prices actually climbed 9.2 per cent in February from 8.6 per cent in January, reflecting the fact that house prices fell by an even larger 1.5 per cent in February 2009.
Economists now remain divided as to whether the dip marks the start of further woe for the housing market or is just a temporary blip.
Figures from the Council of Mortgage Lenders recently showed a 32 per cent drop in gross lending for home loans in January. This hit a 10-year at £9.1bn.
Meanwhile cautious consumers on tight budgets and rising unemployment are also taking their toll.
Martin Gahbauer, chief economist for the Nationwide, said: "Even without the impact of stamp duty changes and the snowy weather, it would have been surprising to see house prices maintain the very strong upward momentum seen for most of 2009."
Howard Archer, chief UK and European economist at IHS Global Insight adds: “The dip in prices reported by the Nationwide following on from the British Bankers Association reporting a sharp drop in mortgage approvals for house purchases in January is supportive to our long-held view that house prices will suffer a significant correction in 2010 and will probably be no better than flat over the year.
“The fact of the matter is that the house prices rises that have been seen since early-2009 are out of kilter with the overall economic fundamentals,” he added.