House prices fell by 0.9 per cent between December and January, the first monthly fall since August 2016 after four successive monthly increases, according to the Halifax house prices index.
House prices in the past three months (November 2016-January 2017) were 2.4 per cent higher than in the previous three months (August-October 2016).
This compared to the 2.5 per cent quarterly rate of change in December, which was the highest since March 2016.
Prices in the three months to January were 5.7 per cent higher than in the same three months a year earlier.
This was lower than December’s 6.5 per cent but followed two consecutive increases in the annual rate from a low of 5.2 per cent in October 2016.
The annual rate is well below the 10 per cent peak reached in March 2016.
The number of first-time buyers is estimated to have risen by 7 per cent in 2016 to 335,7501 in 2016, according to the recent Halifax First-Time Buyer Review.
This was the highest level since the start of the financial crisis in 2007 (359,900). First-time buyer numbers still remain 17 per cent below the immediate pre-crisis peak of 402,800 in 2006.
Total UK home sales in 2016 were marginally higher (+0.4%) than in 2015 at 1.23 million.
Sales in the fourth quarter of last year were 0.5 per cent higher than in quarter three in 2016.
Despite this modest quarterly improvement, sales in the final quarter of 2016 were 9 per cent lower than in the last three months of 2015.
The volume of mortgage approvals for house purchases – an indicator of completed house sales – increased by 1 per cent between November and December, to 67,900.
This was the highest level since March 2016 when approvals were boosted ahead of the increase in stamp duty on second homes and buy to let properties in April.
Approvals in the fourth quarter were 9 per cent higher than in the previous quarter, indicating that homes sales could increase over the coming months.
Supply remains very low. Nationally, new instructions to sell failed to pick-up in December, marking the tenth successive month without any improvement in the flow of new listings.
As a result, stock levels remain close to a record low, severely restricting choice for would-be buyers and constraining market activity.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: "The Halifax figures are interesting from the monthly as well as the quarterly perspective as they show a broadly slowing market in response not just to seasonal but other factors, which we have also noticed in our offices. Worries about rising inflation and what this means for general living costs and interest rates, as well as stricter mortgage criteria and the focus on affordability, are having an impact on people’s decision-making.
"However, there are some signs of encouragement, confounding some of the more gloomy predictions, with the rise in number of first-time buyers who are taking advantage of a more level playing field as buy-to-let investors look for higher-yielding opportunities elsewhere in response to increased tax and legal obligations.
"Low levels of housebuilding continue to prop up house prices and while proposals in the White Paper may attempt to address this, the reality is that it is unlikely to change anytime soon. There is no early prospect of any meaningful changes in the short term - it really is a long-term project which won’t so much help this generation of first-time buyers as the next one."
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Mortgage rates remain low and continue to support activity in the housing market. As a brokerage, we worked with more than 90 mortgage lenders in the past 12 months, all of which are keen to do more lending this year and this is being reflected in low rates and/or the easing of criteria. If buyers can find a property they wish to purchase, then this really is a good time to secure mortgage finance."
