Annual house price growth decreased to 6.9% in August, according to the House Price Index published by Halifax.
House price growth declined from 8.4% in July to 6.9% in August, continuing a downward trend from March, when the growth rate reached 10%.
August’s rate is the lowest yearly growth rate since October 2013.
Despite a 0.2% reduction in house prices between July and August, house prices in the three months to August were 0.7% higher than in the previous three months.
Martin Ellis, Halifax housing economist, said: “House price growth continued the trend of the past few months in August with a further moderation in both the annual and quarterly rates of increase.
“There are also signs of a softening in sales activity.”
The reduction in house price growth comes amid a slight fall in property sales, and a reduction in the number of mortgage approvals and instructions to sell.
UK home sales declined marginally (by 1%) between June and July following successive increases in the two preceding months.
The volume of mortgage approvals for house purchases – a key indicator of completed house sales – fell by 5% between June and July. Approvals, at 60,912, were the lowest since January 2015, according to the Bank of England.
New instructions by home sellers declined for the fifth successive month in July, contributing to a further drop in the stock of homes available for sales. The Royal Institution of Chartered Surveyors’ monthly report warns the level of houses on the market remains near a record low.
Ellis added: “The slowdown in the rate of house price growth is consistent with the forecast that we made at the end of 2015.
“Increasing difficulties in purchasing a home as house prices continued to increase more quickly than earnings were expected to constrain demand, curbing house price growth.”
Jeremy Duncombe, director, Legal & General Mortgage Club, said: “Despite these figures showing a slight month on month dip, house price inflation is still on the rise, albeit slowing in its momentum. However, we’re still in the unknown when it comes to discovering if these results are symptom of Brexit uncertainty or just the general lull that accompanies the summer months.
“What is clear with these figures however, is that annually house prices are still on the rise at levels well above average wage inflation. It’s this growing gap that ultimately makes the housing market more unaffordable, and the prospect of homeownership much harder for buyers looking to take the first step onto the housing ladder.
“This is something that will only continue until we see the Government put housing at the top of its priority list and mobilise our public and private sectors to build hundreds of thousands of new, reasonably priced homes to guarantee more people a chance at homeownership.”
And Ian Thomas, co-founder and director of LendInvest, added: “There have been a number of external factors that have chipped away at the property market in recent months, from the additional stamp duty charge to Brexit, with the traditional summer slowdown weighing in as well.
“While transactions have certainly slowed in Central London as a result, the sentiment we get from buyers around the rest of the country is that it is close to business as usual.
“September will be a useful barometer for what comes next for the property market, as transactions tend to pick up once the holiday period is over.
“Nonetheless the fundamentals of the property market are unchanged – we do not have enough homes, and we aren’t building enough homes to address that shortage.
“That will act as a brake on any house price softening in the months to come.”
Joshua Raymond, market analyst at XTB.com, suggested Brexit and the summer holiday period had some impact on the price growth rate.
He said: “There are two aspects influencing price declines. First and foremost, August is historically a weak month for sales with many buyers preferring to go on holiday than look for house purchases, triggering less demand and applying downward pressure on prices paid.
“Secondly, the impact of the Brexit in sapping consumer confidence, especially at the top end of the market, despite the fall in the pound potentially attracting foreign buyers.
“The key will be to see if we continue to see price declines in September to November period, where demand is typically higher than the summer months and will give us better evidence of the potential for a looming house price correction, especially in London.”