Average house prices dipped by -0.4% in May from £297,798 to £296,648 and annual growth slowed to 2.5%, the latest Halifax index shows.

May’s figure compares to a monthly increase of 0.3% in April and an annual increase of 3.2%.

Northern Ireland continues to see the steepest annual growth with prices up by 8.6% to £209,388, although the figure remains well below the UK average.

Wales and Scotland also saw strong annual growth of 4.8% in May, taking average prices up to £230,405 and £214,864 respectively.

Within England, the North West and Yorkshire and the Humber saw the strongest growth at 3.7%, taking average prices to £240,823 and £213,983.

London house price growth remains more subdued, with prices up by 1.2% to £542,017.

Halifax head of mortgages Amanda Bryden says the small monthly movements in the UK average show the housing market has remained “largely stable”, with prices down by -0.2% since the start of the year.

She says: “The market appears to have absorbed the temporary surge in activity over spring, which was driven by the changes to stamp duty.

“Affordability remains a challenge, with house prices still high relative to incomes.

“However, lower mortgage rates and steady wage growth have helped support buyer confidence.

“The outlook will depend on the pace of cuts to interest rates, as well as the strength of future income growth and broader inflation trends.”

Quilter financial planner Holly Tomlinson says that despite the drop in demand following the stamp duty increase, “house prices have not fallen off a cliff”.

She says: “The fact that prices fell only modestly in May indicates that supply remains constrained and sellers have not yet been forced to adjust their expectations.

“However, with affordability still stretched and borrowing costs relatively high, the risk of a more prolonged slowdown cannot be ignored.

“Mortgage rates are edging down slightly, but for many buyers, this remains a far cry from the ultra-low rates of recent years.”

“A more meaningful pick-up in buyer demand may not materialise until there is clearer evidence that mortgage costs are on a sustained downward path.”

SPF Private Clients chief executive Mark Harris says: “The cheapest fixed-rate mortgages have started rising again with the trajectory of swap rates, which underpin their pricing, suggesting further mortgage rate increases in the short term.

“However, rates are only part of the picture.

“The easing of criteria and changes to mortgage stress tests by lenders such as Nationwide and NatWest, following changes to Bank of England guidance in March, means tens of thousands of pounds of extra borrowing may now be available to buyers.

“This will boost affordability, enabling more borrowers to get on the housing ladder in coming months.”

Yesterday Rightmove reported the busiest May for agreed sales since 2021.