House prices suffered their worst slump in 11 years thanks to inflation and higher mortgage rates, according to Nationwide Building Society.
Prices fell by 1.1% year on year in February, the first annual decline since June 2020.
February’s negative annual price growth was also the weakest seen in over 10 years, since November 2012.
Prices are now 3.7% lower than their August 2022 peak, Nationwide noted in its monthly house price index.
The price of an average property in the UK is now £257,406, down from £258,297 in January.
Prices slipped on a monthly basis too, falling by 0.5% from January and across the UK.
House prices have fallen on a monthly basis for six months in a row due to higher borrowing costs for buyers.
The price drop was also linked to the "financial market turbulence" which happened in response to the infamous Mini-Budget at the end of September last year.
Before this, mortgage rates were already rising last year as the Bank of England put up interest rates to tackle the soaring cost of living and spiked at 6% after the Mini-Budget.
Some lenders have started reducing fixed rates to below 4% for the first time since the Mini-Budget - but this is far higher than levels close to 1% seen in late 2021.
Robert Gardner, Nationwide's chief economist, said "While financial market conditions normalised some time ago, housing market activity has remained subdued.
"This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.
"Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021."
The Nationwide boss also noted that it would be "hard for the market to regain much momentum in the near term" as the labour market is expected to weaken as the economy shrinks going forward.
Robert added: "Indeed, despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay.
"In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the private rented sector where rents have been rising strongly.
Looking forward, Gardner has predicted property prices would fall by 5-6% from their peak in August 2022 to the trough which "feels like a relatively soft landing given the pressure on household finances".
