House price growth slowed in January, according to the latest house price index from Halifax.

The monthly house price growth fell to +0.3%, the lowest rise since June 2021, but the annual rate of growth held steady at 9.7%.

Meanwhile, average house price increases to a new record high of £276,759, while transaction volumes returned towards pre-Covid levels.

Russell Galley, managing director of Halifax, said: “House price growth slowed somewhat at the start of the year, rising by just 0.3% in January, the smallest monthly increase since June 2021. This followed four consecutive months of gains above 1%, and with annual growth remaining at 9.7%, the average UK house price was little changed, edging up slightly to a new record high of £276,759. Overall prices remain around £24,500 up on this time last year, and £37,500 higher than two years ago.

“Following the peak activity of 2021, transaction volumes are returning to more normal levels. Affordability remains at historically low levels as house price rises continue to outstrip earnings growth. Despite record levels of first-time buyers stepping onto the ladder last year, younger generations still face significant barriers to home ownership as deposit requirements remain challenging.

“This situation is expected to become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living, and rises in interest rates begin to feed through to mortgage rates. While the limited supply of new housing stock to the market will continue to provide some support to house prices, it remains likely that the rate of house price growth will slow considerably over the next year.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “2021 was a bumper year for the housing market and was always going to be a tough act to follow. Monthly house price growth may have fallen slightly, but nevertheless the year has also got off to a good start with confidence in the housing market remaining, supported by relatively cheap mortgages, even though interest rates are edging up from all-time lows.

“While rates have increased since the autumn where we saw the historical low point for fixes, there is still some incredible value in 10-year fixes in particular, with several lenders launching deals recently or reducing pricing.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Though price growth is slowing, these figures demonstrate the underlying strength of the market and how likely it is to withstand increasingly stretched affordability.

“We know from what’s happening on the ground that the double-whammy of rising inflation and interest rates are already prompting some who thought prices could only go one way to request valuations and make properties available for sale.

“On the other hand, supply still can’t keep up with demand, especially for family houses, and with around 50% of homes owned outright there are many who are relatively unaffected by interest rate rises.”