Annual house price growth has slowed to the lowest rate in four years, according to Britain’s biggest mortgage lender.

Despite the slowdown, Halifax, which is owned by Lloyds Banking Group, said house price growth was still underpinned by low mortgage rates and a shortage of homes for sale, which have countered falling household incomes. The average price of a home rose to £219,266 in July, up 0.4% from June.

The monthly rise partially offset the 0.9% drop recorded in June, but prices were still down 0.2% in the last three months. This was the fourth consecutive quarter of price declines, the first time this has happened since November 2012.

The annual rate is the lowest since April 2013, with house prices in the three months to July up 2.1% from a year earlier. Annual house price growth has declined from a peak of 10% in March 2016.

Photograph: Halifax

Russell Galley, the managing director of Halifax Community Bank, said: “House prices continue to remain broadly flat, as they have since the start of the year.”



He noted that rising employment levels had pushed the unemployment rate down to 4.5%, the lowest since 1975. “However, this improvement in the jobs market has not, as yet, boosted wage growth, resulting in earnings rising at a slower rate than consumer prices,” Galley added.

“This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.”

Experts point to the declining number of sales as evidence of a cooling market. They fell 3% between May and June to 96,910, the lowest level since October 2016, according to HMRC data.

A rival house price index from Nationwide, the UK’s biggest building society, painted a similar picture. It recorded a 0.3% monthly increase in July, while the annualised growth figure dropped to 2.9%. Nationwide reported monthly house price declines for March, April and May but June and July saw prices rise again.

The housing market has surprised some economists with its resilience at a time of political uncertainty, rising inflation and stagnating or falling wages. Both Halifax and Nationwide say a lack of homes on the market will continue to support house prices in coming months.

Halifax noted that new instructions for home sales fell for the 16th month in a row in June, with homes listed for sale at estate agents at an all-time low, citing data from the Royal Institution of Chartered Surveyors (RICS).

Photograph: RICSS

Jonathan Hopper, the managing director of Garrington Property Finders, said the housing market was losing steam. “The speed of price growth has slowed substantially, and at a national level average prices are still flatlining rather than falling. But what growth there is is meandering and listless, with prices being propped up by record low levels of supply.

“On the other side of the equation there is genuine buyer intent, and rumours that the government may review the help to buy scheme could add fuel to the fire as some hesitant buyers may be spurred into action by the idea of ‘use it or lose it’.”

Halifax said average house prices were still 10% above their peak in August 2007.

Brian Murphy, the head of lending for the Mortgage Advice Bureau, said: “House price growth is continuing in line with expectations, with independent industry bodies such as RICS forecasting annual house price growth of between 2% and 4% for 2017.”

Howard Archer, chief economic adviser to the EY Item Club, said: “House prices look unlikely to rise by more than 2% over 2017. House prices could well be essentially flat over 2018.”