House prices fell by 0.6 per cent last month, according to Halifax's seasonally adjusted index, all but wiping out the gain recorded in a broadly static market since the start of the year.
Over the latest 12 months house price inflation as recorded by Britain's biggest mortgage lender is now down to 5.7 per cent, lower than at any other time in the last four years and down from a peak of
22.1 per cent for the 12 months to last July. Rival lender Nationwide puts the latest 12-month increase at 5.5 per cent and says it is "90 per cent certain" that the Bank of England will leave its official interest rate unchanged tomorrow at 4.75 per cent.
May was the third month in the past six that Halifax has reported a house price fall.
"House price inflation is now at the lowest rate since may, 2001 and is likely to fall further over the coming months given the large monthly increases in the middle of 2004," said Tim Crawford, Halifax's group economist.
The average price dipped by just over £1,000 between April and May to £162,411, lower than in any month since November and down 0.1 per cent on 2005 so far.
Halifax takes a more bullish view of the economy and the housing market than Nationwide, where Stuart Bernau, an executive director, noted: "There has been a noticeable change of sentiment on the economy this month and people now seem to feel much more uncertain about the future."
Halifax, by contrast, pointed out that the housing market "is underpinned by sound fundamentals, including record employment levels and rising real earnings."