LONDON: British house prices fell unexpectedly last month as inflation continued to squeeze household budgets, dragging annual house price growth down to one of its weakest rates in years, figures from major mortgage lender Halifax showed on Wednesday.

Average house prices fell 0.6 per cent in January after a 0.8 per cent decline in December, Halifax said, well below a consensus forecast of a 0.2 per cent rise in a Reuters poll of economists and the first time prices have fallen for two months in a row since just after June 2016’s Brexit referendum.

British annual house price growth has slowed since the vote to leave the European Union, though the impact has been concentrated in London and neighbouring areas, with most other parts of the country relatively little affected.

House prices in the three months to January were 2.2 per cent higher than the same time a year earlier, down from 2.7 per cent in December and the weakest increase since July, when prices rose at the slowest pace since April 2013.

Howard Archer, an economist at consultants EY Item Club, predicted house prices would rise by two per cent this year, as high inflation and Brexit uncertainty kept a lid on prices.

“Housing market activity is expected to remain lacklustre as the marked squeeze on consumer purchasing power only gradually eases, confidence is fragile and appreciable caution persists over engaging in major transactions,” he said.

British consumer price inflation hit its highest rate in more than five years in November, and the Bank of England raised borrowing costs for the first time in more than a decade.

Reuters