House prices fell 3.1% on an annual basis in March, Nationwide says, which is the biggest fall by this measure since July 2009.
This compares to a 1.1% annual drop in February.
On a monthly basis, house prices dipped 0.8% in March, following a 0.5% decline the month before.
Nationwide says that the average house price in the UK is now £257,122.
In the first quarter of this year, the building society adds, nine out of the 13 regions it measures saw house prices falls, with all regions at least seeing growth slow down.
Scotland was the worst performer, with house prices down 3.1% measured annually, and the West Midlands saw prices rise 1.4%, making it the best performing area.
In the first quarter of 2022, the West Midlands housed 6.1% growth.
Nationwide chief economist Robert Gardner says: “The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued.
“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation. Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.”
The Guild of Property Professionals chief executive Iain McKenzie says: “With the largest annual decline in house prices since the depths of the financial crisis, homeowners may be worried about what this means for them.
“Unlike the financial crisis, we haven’t seen an aggressive drop-off in transactions, so the slowdown in prices has hardly been the crash that was expected.
“Sellers are becoming more open to negotiating with buyers on the asking price and that has the potential to skew the data.”
McKenzie continues: “While we are forecasting an overall decrease of around 8% this year, this would only bring house prices in line with levels back in 2021.
“Confidence is returning to the property market following the fallout of the mini-Budget last September and we should expect further improvements, so long as inflation is brought under control this year.”
However, Hargreaves Lansdown personal finance expert Sarah Coles comments: “Buyers have been broken by rampant inflation, jacked-up mortgage rates, a stagnating economy, and the threat that there could be worse to come.
“Rics figures for February showed that buyer demand fell again – for the tenth consecutive month. Buyer enthusiasm is likely to have been dampened even further by the fact the gradual fall in mortgage rates stalled in March.
“At the end of February, according to Moneyfacts, the average two-year deal was at 5.32%, and by the 30 March it had risen very slightly to 5.38%.
“As a result, sellers are having to compromise in order to shift their properties. Rics says that 60% of homes worth up to £500,000 are selling for less than the asking price, and Zoopla found that 40% of home sellers are cutting their prices even before a seller comes along – by an average of 4.5%.”
She continues: “There is a glimmer of hope on offer from the mortgage market. The bump in rates is likely to be a temporary blip, due to inflation coming in higher than had been expected. As we get further into the year, we’re expecting inflation to fall significantly, so we may well see rates on the way down again.
“Already February saw a very small pickup in the number of mortgages approved for the coming months. However, it’s still less than half the numbers we were seeing two years earlier, so you need to look very closely to see any real hope in these figures.
It’s easy to read these figures as the start of a slippery slope, where price drops start gradually and then accelerate. We can’t yet rule out the chances of a gradual drift south and a softer landing, but it’s looking increasingly unlikely.”
