The UK housing market slowed again in August with the biggest monthly price fall since July 2012, according to Nationwide’s latest house price index, as experts warned a no-deal Brexit could hit London prices “like a sledgehammer”.

The average price was £214,745, down 0.5 per cent from £217,010 the previous month, while annual growth slowed to 2 per cent from 2.5 per cent.

Prices are still expected to rise by around 1 per cent this year, said Nationwide’s chief economist Robert Gardner.

He added: “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.

“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low.”

Meanwhile, Nationwide’s index showed help to buy accounted for around 8 per cent of mortgages in England in the year to March 2018, an increase of 21 per cent compared to the same period last year.

Mr Gardner said it was “unclear how much help-to-buy activity represents additional demand and how much has simply replaced activity that would already have taken place”.

“The scheme has, however, been a key source of demand for newly built homes in recent years,” he said.

Jonathan Samuels, chief executive of property lender Octane Capital, said: “You can’t help but think the government is boxing itself into a corner on help to buy.

“Help to buy is certainly enabling many more people to get onto the property ladder but serious question marks remain over the longer term impact of what is an artificial stimulus.”

Mr Samuels said it was not surprising that prices fell in August, which is traditionally a quiet month for the property market.

However, he warned that a no-deal Brexit could prompt a severe shift in prices.

“There is a blanket of uncertainty covering the UK property market at present,” he said.

“While the employment market remains strong, stubbornly high inflation, the potential for another rate rise, overstretched household finances and the growing possibility of a no-deal Brexit are seeding serious doubt in the minds of prospective buyers.

“A Brexit no-deal could hit prices in the capital, especially at the higher end, like a sledgehammer.”

Lucy Pendleton, founder and director of estate agents James Pendleton, said Nationwide’s prediction of 1 per cent growth in the market this year would mean prices finish on just over £213,000, a level not seen since April and only around £1,500 lower than current prices.