According to Halifax’s House Price Index, this is the largest year-on-year decrease since June 2011 and is equivalent to a £7,500 drop.

The report continued that the typical UK property is £285,932, which compares to a peak of £293,992 last August.

Average house prices decreased by 0.1% in June month-on-month, which is the third consecutive monthly decline.

Kim Kinnaird, director of Halifax Mortgages, said: “With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at plus 12.5% in June 2022 – supported by the temporary Stamp Duty cut.”

She continued that to some extent the annual house price figure “masks the fluctuations” seen in the market over the last year.

Kinnaird said that average house prices were up 1.5%, or £4,000, this year. Most of the growth come from the first quarter following the sharp fall after the mini Budget at the end of the year.

“These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers.

“That said the housing market remains sensitive to volatility in borrowing costs. Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month,” she explained.

Affordability squeeze will ‘act as a brake on demand’

Kinnaird said that the “resulting squeeze on affordability will inevitably act as a brake on demand” as buyers reconsider what they “realistically can afford to offer”.

“While there’s always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year,” she added.

Kinnaird said that the mortgage charter offers “reassurance that mortgage holders have a range of options if they’re concerned about making repayments, and that lenders will be flexible when supporting anyone in difficulty”.

She continued that the depth and the persistence of house price downturn “remains hard to predict”, but it was likely that consumer price inflation would come down in the near term as energy and food prices reverse steep rises.

However, Kinnaird said that core inflation was “clearly proving stickier than originally expected”.

“With markets now forecasting a peak in bank rate of over six per cent, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year,” she added.

New build sector showing ‘resilience’

Halifax said that new build property prices were up 1.9% annually, which it said suggested “resilience” in the sector.

However, it said that the rate of growth had continued to slow and had dropped to its lowest level for three years.

Existing properties were down 3.5% year-on-year in June, which is the steepest decline since August 2009.

Flats decreased 3.1% year-on-year, followed by terraced homes at negative 2.5%, with semi-detached and detached homes down 1.9% and 1.3% respectively.

South of England reporting biggest ‘downward pressure’

House prices in the South of England faced the largest “downward pressure” in prices at a 3% fall year-on-year, which is the largest since 2011.

This was followed by London at -2.6% and the South West and East Midlands at -2.1% apiece.

The West Midlands reports a 1.5% annual uptick, with Yorkshire and the Humber reporting a 0.2% annual rise.

Northern Ireland house prices rose by 0.2% year-on-year, with Welsh house prices contracting by 1.8% and Scotland falling 0.1% year-on-year.