House prices in the UK fell by 0.1 per cent in July, according to Halifax - their first fall since June 2021.
The mortgage lender said rising borrowing costs had added to the squeeze on household budgets against a backdrop of "exceptionally high" price-to-income ratios.
Earlier this week, data published by the Office for National Statistics showed the average home sold in England now costs 8.7 times the average annual disposable income - the highest this ratio has been since records began in 1999.
Halifax managing director Russell Galley said: "While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
"That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident.
"The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices."
In the short term, Galley expected house prices would continue to slow due to the headwinds of rising interest rates and inflation.
The average UK property now costs £293,221 - though this disguise wide regional variation with the average sitting at £551,777 in London and £187,102 in Northern Ireland.
Andrew Montlake, managing director of mortgage broker Coreco, said: "With a deep and lasting recession forecast, the property market now has one hell of a fight on its hands.
"The resilience of the jobs market will be key. If the predicted recession sees unemployment rise sharply, the property market will take a hit. However, even amid the apocalyptic statements from Threadneedle Street, the lack of supply is the property market’s joker, and will support prices in the tough year or two ahead.
"However, we may have just seen the last of annual price growth being in double digits."