House prices fell month-on-month for the first time in 15 months in October, an index showed.
The 0.9% drop marked the first monthly drop since July 2021 and the largest drop since June 2020.
Annual house price growth also slowed sharply to 7.2% in October from 9.5% in September, the Nationwide Building Society said.
In the UK, the average house price in October was £268,282 – and the housing market is expected to slow in the coming months, the company added.
Robert Gardner, Nationwide’s chief economist, said: “October saw a marked slowdown in annual house price growth, to 7.2% from 9.5% in September.
“The market was undoubtedly impacted by the turmoil following the mini-budget, which led to a sharp rise in market interest rates.
“Higher borrowing costs have increased housing affordability at a time when household finances are already under pressure from high inflation.”
Mr. Gardner added, “The market is expected to slow down over the next several quarters.
“Inflation will remain elevated for some time to come and (the base rate) is expected to rise further as the Bank of England seeks to secure a slowdown in demand in the economy to ease domestic price pressures.
“The outlook is extremely uncertain and much will depend on the performance of the economy as a whole, but a relatively soft landing is still possible.
“Longer-term borrowing costs have declined in recent weeks and could moderate further if investor sentiment continues to recover.
“Given the weak growth outlook, labor market conditions should ease, but they are starting from a solid position, with unemployment at its lowest level in nearly 50 years.
“Furthermore, household balance sheets appear to be in relatively good shape with significant protection against higher borrowing costs, at least for a period, with more than 85% of mortgage balances at fixed interest rates.
“The tight housing affordability also reflects underlying supply constraints, which should provide some support for prices.”
Mr. Gardner added that the running costs of less energy-efficient properties tend to be significantly higher, leaving these households particularly vulnerable to energy price increases.
Jeremy Leaf, a North London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: life concerns.
“Activity has slowly started to pick up since mortgage rates started to stabilize and are now starting to fall. Buyers are negotiating hard as they scramble to take advantage of good mortgage deals, while prices continue to rise. be supported by lack of stock.
Jonathan Hopper, managing director of Garrington Property Finders, said: “Sellers who only months ago could make their choice of offers are now biting the hand of a solid, procedural buyer – even those asking for a discount.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The fall in the Nationwide index in October – the first in 15 months and the steepest since June 2020 – provides the strongest signal yet. that real estate prices will fall in the face of soaring prices. mortgage rates and the compression of real disposable incomes.
Nicky Stevenson, managing director of estate agent Fine & Country, said: “Dealing levels are likely to continue to fall in the near term as the housing market adjusts to this new era of higher interest rates. “
Tom Bill, head of UK residential research at estate agent Knight Frank, said: ‘Demand will come under more pressure next year as more people come to terms with the end of agreements in fixed rate and mortgage deals made earlier this year when rates were lower begin to expire.
“Government stability will help support transactions, but we are seeing a fundamental change in rates after 13 years of ultra-low borrowing costs that will drive prices lower.
“Low unemployment, tight supply and well-capitalized lenders mean we should avoid the kind of double-digit falls seen during the financial crisis.”