UK house prices fell by 0.2% month on month in December, the first monthly drop since March, according to Britain’s biggest mortgage lender.

Data released by Halifax also showed that the price of the average home climbed by 3.3% last month compared with the same period a year earlier, down from an annual rate of 4.7% in November.

House prices gathered steam in the latter half of 2024 because of a drop in mortgage rates, rising wages and easing of price inflation, which put less pressure on consumer finances.

“In many areas across the country, house prices were also buoyed by demand outstripping supply, possibly further amplified by homeowners holding off putting their property on the market – perhaps in anticipation of mortgage rates reducing further,” Amanda Bryden, the head of mortgages at Halifax, said.

Government plans to raise the threshold on stamp duty charges in England and Northern Ireland from March – which have been temporarily lowered since 2022 – also fuelled demand, giving prospective first-time buyers further motivation to rush to get on the housing ladder, Halifax said.

Together, those factors led to a pickup in mortgage inquiries, and demand for home loans returned to pre-pandemic levels to hit their highest level in more than two years.

However, Halifax warned that affordability could end up hampering further house price growth in the months ahead.

“Where does that leave the housing market for 2025? While the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming stamp duty policy changes, mortgage affordability will remain a challenge for many, especially as the bank rate is likely to come down more slowly than previously predicted,” Bryden said.

“However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year.”