UK house price growth eases to five-year low - Halifax

House prices in the UK registered their first quarterly fall since May last year in the three months to February, while on a yearly basis, they hit their lowest rate of growth since March 2013, according to the latest data from lender Halifax.

House prices in the quarter were down 0.7% compared to the previous three months.

On the month, prices were up 0.4% following 0.5% and 0.8% declines in January and December, beating expectations for a 0.3% increase. On the year, meanwhile, house prices rose 1.8% to an average price of £224,353 in February, ahead of expectations for a 1.6% gain but below the 2.2% growth seen in January and marking the slowest growth in five years.

Russell Galley, managing director at Halifax Community Bank, said: "House prices continue to remain broadly flat, as they have since the end of last year.

“Despite the November rise in the Bank of England Base Rate, mortgage rates continue to stay low by historical standards. While we expect price growth to remain low, the low mortgage rate environment, combined with an ongoing shortage of properties for sale, should continue to support house prices over the coming months."

Samuel Tombs, chief UK economist at Pantheon Macroeconomic, said: "The slowdown in the three month average of year-over-year growth in house prices to the lowest rate since March 2013 demonstrates that even the modest rise in mortgage rates over the last few months has hit the market hard. New mortgage rates remain on course to rise sharply over the coming months, given that wholesale funding costs have increased since the start of the year and the Term Funding Scheme no longer is subsidising new lending. Record-high loans-to-income ratios mean that new buyers will have to devote a much larger share of their annual incomes to monthly loan repayments in order to borrow as much as their predecessors.

"Admittedly, a slight uptick in wage growth and a continued lengthening of mortgage terms will provide some counterbalancing support to prices. But the rise in mortgage rates will be the dominant influence on the market, depressing demand and ensuring that house prices merely hold steady this year."

Howard Archer, chief economic advisor at the EY Item Club, said: "We believe that 2018 will be a difficult year for the housing market. Price gains over the year are likely to be limited to a modest 2%.

"The fundamentals for house buyers are likely to remain challenging. The squeeze on consumers’ purchasing power remained significant going into 2018, and it is likely to only gradually ease as the year progresses. In addition, housing market activity could be hampered by fragile consumer confidence and a limited willingness to engage in major transactions."