British house prices unexpectedly fell last month, taking the annual rate of price increases to its lowest in two years, mortgage lender Nationwide said on Thursday.
Nationwide said house prices dropped by 0.2 percent on the month in June, well below economists' forecasts of a 0.2 percent rise. This pushed the annual rate of growth to a two-year low of 3.3 percent from 4.6 percent in May.
"This maintains the gradual downward trend that has been in evidence since mid-2014," Nationwide economist Robert Gardner said. "House price growth continues to outpace earnings, but the gap is closing, helped by a pickup in annual wage growth.
A year ago Nationwide reported annual house price inflation of 11.8 percent, but tighter lending rules from regulators have slowed the pace of price rises. Many economists think this will prove temporary, however, as the number of new homes being built is insufficient to keep up with demand, and British wages are starting to grow faster.
"House prices are likely to be firmer over the second half of the year amid improving activity. A current shortage of properties on the market is also likely to provide support to house prices," said Howard Archer, chief UK economist at IHS Global Insight.
Archer said he expected house prices to rise 6 percent this year, and 5 percent in 2016.
Rival mortgage lender Halifax reported last month that house prices in the three months to May were 8.6 percent higher than a year earlier.
Nationwide said annual house price growth in the second quarter of 2015 was fastest in Northern Ireland, at 8.0 percent. But prices there are still 45 percent below their 2007 peak, reflecting trends in the Irish Republic rather than those in the rest of the United Kingdom, where prices are about 10 percent above pre-crisis levels.
House prices in London have risen by 7.3 percent over the past year, while the biggest fall was in Scotland, where they have dropped by 1.0 percent.