UK house prices suffered the biggest monthly fall since 2012 in August, according to lender Nationwide, which warned that subdued economic activity and tightening consumer budgets would likely continue to drag on house price growth this year.

House prices fell 0.5 per cent in August, a stark reverse from the 0.7 per cent gain the previous month and well below economist forecasts. That left the annual pace of growth at 2 per cent, from 2.5 per cent in July. The average price of a UK house at the end of August was £214,745, according to Nationwide. Economists polled by Reuters had expected to see a monthly gain of 0.1 per cent and an annual gain of 2.7 per cent. August is traditionally a quiet period for the housing market in the UK, but experts warned that Brexit uncertainty and worries over the economy amid a wider consumer slowdown were weighing on sentiment. At the start of this month, the Bank of England’s Monetary Policy Committee also increased the base rate from 0.5 per cent to 0.75 per cent, the highest level in almost a decade. Robert Gardner, Nationwide chief economist, said the decline in the annual rate was still (just) within the range of 2 per cent to 3 per cent seen over the past year, “suggesting little change in the balance between demand and supply in the market”. He added: “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low. Overall, we continue to expect house prices to rise by around 1 per cent over the course of 2018.”

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