This compares to growth of 4.4 per cent in November and represents the fourth consecutive month that house prices continued to slow.
The average house price in the UK now sits at £262,068, down from £263,788 in November’s HPI.
Commenting on the figures, Nationwide’s chief economist, Robert Gardner said the monthly change in prices represents a “much smaller decline than in the previous couple of months”.
He continued: “However, December also marked the fourth consecutive monthly price fall - the worst run since 2008.”
Gardner acknowledged that while financial market conditions have settled, the housing market has shown “few signs of recovery: with mortgage rates not yet normalised".
While it will be difficult, the vast majority of those refinancing should be able to cope — Robert Garnder, Nationwide
“It will be hard for the market to regain much momentum in the near term as economic headwinds strengthen, with real earnings set to fall further and the labour market widely projected to weaken as the economy shrinks,” Gardener said.
December’s figures may partly represent an early season slowdown according to Gardner, and as such potential buyers may be waiting until the new year to enter the market.
In Gardner’s opinion, the main factor that would help achieve a soft landing for house prices in 2023 is if forced selling can be avoided.
“There are good reasons to be optimistic on that front,” he said.
“Most forecasters expect the unemployment rate to rise towards 5 per cent in the years ahead – a significant increase, but this would still be low by historic standards.
“Moreover, household balance sheets remain in good shape with significant protection from higher borrowing costs, at least for a period, with around 85 per cent of mortgage balances on fixed interest rates.”
Gardner also pointed out that stress testing for mortgages is typically done at an interest rate above current levels, which means “while it will be difficult, the vast majority of those refinancing should be able to cope.”
Nationwide predicts that there will be a modest decline in house prices in 2023, of about 5 per cent.
Responding to the latest data, some mortgage advisers said they are the prelude to a very difficult year.
Adviser at Mather & Murray Financial, Samuel Mather-Holgate said: “These are the snowflakes that started the avalanche. People will be in no rush to buy properties at the top of the mountain in the New Year.”