This is the weakest level registered since November 2012.

The Nationwide HPI also highlighted a 0.5% month-on-month drop, with prices 3.7% lower than the August 2022 peak.

The average house price recorded in February (not seasonally adjusted) was £257,406.

Commenting on the latest figures, Nationwide’s chief economist Robert Gardner said: “The recent run of weak house price data began with the financial market turbulence in response to the mini-budget at the end of September last year — while financial market conditions normalised some time ago, housing market activity has remained subdued.

“It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong.

“Despite the modest fall in house prices, for a prospective first-time buyer earning the average income looking to buy the typical home, mortgage payments remain well above the long run average as a share of take-home pay.

“In addition, deposit requirements remain prohibitively high for many and saving for a deposit remains a struggle given the rising cost of living, especially for those in the PRS, where rents have been rising strongly.”

Industry reacts to the latest Nationwide HPI data

Nicky Stevenson, managing director at Fine & Country:

“This fall in house prices moves the spotlight onto spring, which will be a critical bellwether for how the housing market is performing during this period of high inflation and economic insecurity. 

“A slowdown in prices in February is not unsurprising given normal seasonal trends, but spring is traditionally busy and we are seeing an increasing number of buyers are being enticed back to the market.

“[This] is playing a part in drawing prospective buyers back to the market, as they are keen to try to secure a good deal on their next home. 

“An improving and increasingly competitive mortgage market is equally giving people more confidence and is already helping with affordability.”

Jason Tebb, CEO at OnTheMarket.com: 

“With annual house price growth turning negative in February for the first time since June 2020, the inevitable rebalancing of the market continues as we head towards spring.

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“Rising interest rates, combined with a higher cost of living have contributed to a slowdown in activity in the market, inevitably impacting the confidence of the average property-seeking consumer in the short-term. 

“However, with inflation appearing to have peaked and market expectations that interest rates are similarly close to their peak, pressure on household budgets should start to ease in coming months.

“In the meantime, serious buyers and sellers are getting on with the business of moving — buyers have less buying power, so vendors need to ensure properties are priced correctly by taking advice from an experienced local agent if they are serious about selling.” 

Kundan Bhaduri, director at property developer and portfolio landlord The Kushman Group:

“With annual house price growth now negative, the first quarter of 2023 is the best buying opportunity in the UK property market we have seen over the past 15 years — this depressed sales market is particularly suited to professional portfolio landlords. 

“I expect sales volumes overall to plateau until summer and rise in the second half of the year, on account of strong demand led by lower interest rates and greater market confidence. 

“It remains to be seen how the Sunak/Hunt duo deliver on the much-needed landlord tax reforms over the next two quarters; depending on the outcome, there could be a sharp increase or plateau in demand from the landlord community this year."

Nick Harris, co-founder of Quarters Residential Estate Agents: 

“Though this data shows downward pressure on prices, demand for property was actually far higher in February than January; this shows that while discretionary buyers are sitting tight, the serious buyers remain active. 

“Sellers are being much more realistic on price, and are typically also buyers, so they appreciate a more balanced property market.”

James Briggs, head of personal finance intermediary sales at Together:

“With the Spring Budget approaching, borrowers will be closely watching for any signs of additional mortgage support to relieve ongoing uncertainty — whether this comes to fruition is not yet clear. 

“Access to specialist lenders who are able to consider personal and financial circumstances will be key for all those hoping to progress with property plans this year, ensuring more people can take that first step on the property ladder.”