House prices recorded their second consecutive monthly fall in April, while the annual rate of growth slowed to 2.6%, the weakest since June 2013, according to the Nationwide Building Society.
House prices fell by 0.4% in the month, after taking account of seasonal effects.
The average price of a home is now £207,699, the mutual said.
Robert Gardner, the Nationwide’s chief economist, said: “In some respects, the softening in house price growth is surprising because the unemployment rate is near to a 40- year low, confidence is still relatively high and mortgage rates have fallen to new all-time lows in recent months.
“While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country.
“Various data suggest that the latest slowdown in house prices may be part of a broader trend. Retail sales growth has slowed markedly in recent months, from a 14-year high of 7.3% in October, to 3.7% in February and 1.7% in March.
“Household budgets are coming under pressure, as wage growth has moderated and inflation has accelerated. The household saving ratio, which measures how much income goes unspent each quarter, fell to an all-time low of 3.3% in Q4 on data extending back to 1963.
“There may also be more fundamental reasons for the slowdown. House price growth has been outstripping earnings growth for a sustained period of time, steadily eroding affordability on a number of metrics. For example, the typical house price is currently 6.1 times average earnings, well above the long run average of 4.3 times earnings, and close to the all-time high of 6.4 times recorded in 2007.
“Moreover, even though mortgage interest rates have touched new lows in recent months, the cost of servicing a typical mortgage is only just in line with long run average, and above long run averages in London and parts of the South of England.”
