It followed a 0.1% drop in June, and means that over the last year average prices have now dropped by 3.8%, according to Nationwide Building Society. The average property is now worth £260,828.

The building society noted that this rate of annual change is now the weakest seen since July 2009, with the price of a typical home now 4.5% below its peak seen in August 2022.

Robert Gardner, chief economist at Nationwide, pointed to affordability being “stretched” for those looking to buy a home with a mortgage. He explained that a buyer earning the average wage and looking to buy a typical first-time buyer property with a 20% deposit would see their mortgage payments account for around 43% of their take home pay, significantly up from the 32% a year ago and the long-run average of 29%.

He continued: “While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once bank rate peaks.”

The data follows figures from the Bank of England showing that purchase and remortgage approvals rose in June.

More mortgage increases ahead

Buyers are likely to be more price sensitive in the coming months due to those affordability concerns, suggested Mark Harris, chief executive of SPF Private Clients. He noted that with another hike in base rate expected this week, the market faces further rising mortgage costs.

“However, a few lenders, including HSBC, Barclays and Nationwide, have reduced their fixed-rate mortgage pricing on the back of better-than-expected inflation news. This has led to a calming of swap rates, which underpin the pricing of fixed-rate mortgages, after weeks of considerable volatility,” he added.

Market is turning a corner

James Forrester, managing director of Barrows and Forrester, said that rather than entering a ‘deep freeze’, the market is in fact “thawing”.

He continued: “Yes, affordability remains an issue, however, just this week we’ve seen a big spike in mortgage market activity, which suggests that an uplift in house prices is just around the corner.”

Forrester suggested that as rates begin to fall, momentum will snowball and reverse the downward house price trends seen in recent months.

This was echoed by Jonathan Samuels, CEO of Octane Capital, who noted that the market outlook isn’t as “turbulent” as the Nationwide figures might suggest.

“While this increase in buyer appetites will take some time to filter through to top line house price growth, it’s certainly an early sign that the worst is behind us,” he continued.