UK average house prices fell by 0.6% to £258,297 in January, according to Nationwide.

The UK’s biggest building society said that annual house price growth has now fallen back to just 1.1%, down from 2.8% in December.

And it added that property prices were now down by 3.6% since their peak in August 2022.

Robert Gardner, Nationwide’s chief economist, said: “There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover. The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget.

“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.”

Iain McKenzie, CEO of The Guild of Property Professionals, added: “The affordability factor is the biggest concern for buyers right now, particularly those just starting on the property ladder. Mortgage rates went through the roof last year and shifted the goal posts for those saving for a deposit. It appears as though we are seeing some stability returning to the market.

“The public can be assured that now is still a good time to buy if you are in a position to do so. You may even be able to save some money on the asking price.

“The economic backdrop remains challenging, but employment remains high, and fuel costs have fallen dramatically from their record highs last year.”