House prices fall for fifth month in a row in longest drop since 2008

House prices fell for a fifth month in a row in January as the property market slump continued.

Between December and January, house prices fell by 0.6pc to £258,297, equal to a fall of almost £4,000.

On an annual basis, house price growth slowed to 1.1pc in January, down from 2.8pc in December, according to the lender Nationwide.

Analysts at Capital Economics said that this was "likely to be the last positive annual reading until the second half of 2024".

Nationwide found that overall prices have now dropped 3.2pc from their peak in August. It is the fifth month in a row that property prices have fallen, their worst run since the financial crisis in 2008.

The fall comes as policymakers are expected to raise the Bank Rate by half a percentage point to 4pc on Thursday, adding further pressure onto thousands of homeowners with tracker mortgages.

Robert Gardner, of Nationwide, said that a 10,600 drop in house purchase approvals in December reflected the sharp decline in mortgage applications in the market chaos triggered by the mini-Budget.

He said: “It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.”

Property website Zoopla reported that buyer demand was similar to 2018 levels, however analysts at Capital Economics said that "even if demand volumes are proving resilient, higher mortgage rates will still reduce most buyers’ budgets, weighing on prices".

Jeremy Leaf, an estate agent in London, noted that a decline in prices was “inevitable” after such a strong run for most of 2022. “The fizz has certainly left the market, leaving behind more serious needs-driven as opposed to discretionary buyers,” he said.

Mr Gardner added that affordability remained stretched, with the highest house price to earnings ratio in London standing at 9.2. Scotland and the North recorded the lowest ratio at 3.4.

“Saving for a deposit is proving a struggle for many given the rising cost of living, especially those in the private rented sector where rents have been rising at their strongest pace on record,” he said.

“Scotland and the North continue to be the most affordable regions but, even there, mortgage payments as a share of take-home pay are at their highest level for over a decade.

However, Mark Harris, of the broker SPF Private Clients, added that interest rates on fixed mortgages had steadily fallen since their peak in November, as banks competed for new business from borrowers.

“Five-year fixes are now available for not much more than 4pc, with Virgin Money launching a five-year fix of 4.17pc this week,” he said.

The average two-year and five-year fixed rates stood at 5.46pc and 5.22pc, according to the analyst Moneyfacts.