The average house price is now more than £12,000 below a peak seen in August last year, according to an index.
Halifax said the typical property value remained largely unchanged in January 2023 at £281,684, compared with December 2022.
It recorded 0.0% house price growth in January month-on-month, following monthly decreases of 1.3% in December and 2.4% in November.
Property values increased by 1.9% annually – the lowest level recorded over the past three years.
Back in August, the average UK house price was £293,992.
Kim Kinnaird, director, Halifax Mortgages, said: “The average house price is now around £12,500 (4.2%) below its peak in August last year, though it still remains some £5,000 higher than in January 2022 (£276,483).
“We expected that the squeeze on household incomes from the rising cost-of-living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years.
“As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near-term.
“Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”
The slowdown in annual house price growth is reflected in most nations and regions across the UK, Halifax said.
The bank’s regional figures are based on the most recent three months of approved mortgage transactions due to smaller sample sizes.
This means they are not directly comparable to the annual house price growth rate for the UK as a whole for the month of January.
The annual rate of house price growth in Wales slowed from 6.0% in December to 2.0% in January, with a new average house price there of £210,275, down by nearly £14,000 from a peak of £224,210 in August.
The South West of England has also seen annual house price growth slow considerably, to 2.7% in January compared with 6.0% in December.
The average house price in the South West has dipped below £300,000 for the first time since March last year.
In Northern Ireland and Scotland the pace of annual growth has eased more slowly, Halifax said.
In Northern Ireland, annual house price growth eased from 7.1% in December to 6.9% in January and in Scotland it slowed from 3.3% in December to 2.4% in January.
In London, house prices stalled in January, with 0.0% growth, compared with a 2.9% increase in December.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Some discretionary demand has disappeared but most buyers need to move and have accepted the fact that a 13-year period of ultra-low rates is over.
“As budgets adjust to higher rates, we think prices will fall by 5% this year but offers are still exceeding the asking price in some areas.”
Nicky Stevenson, managing director at estate agent group Fine & Country said: “A month without a fall in house prices brings some much-needed stability to the property market, and will likely encourage more sellers to put their homes up for sale ahead of the traditionally busy springtime.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “There is encouraging news on the mortgage front with fixed-rate pricing continuing to edge downwards.
“While the days of sub-1% fixes are long gone, rates are beginning to look more palatable for borrowers, which should be a welcome boost for the housing market and encourage more to take the plunge.”
Steven Morris, director at Bristol-based mortgage broker, Advantage Financial Solutions, said: “Though the property market is still under pressure, the fixed-rate mortgage price war currently raging and the fact prices were flat in January shows there’s light at the end of the tunnel.
“Every time we apply for a fixed-rate for a customer, within no time it’s cheaper elsewhere.”
Here are average house prices in January and the annual change, according to Halifax:
– East Midlands, £234,946, 3.5%
– Eastern England, £333,426, 3.0%
– London, £530,396, 0.0%
– North East, £164,730, 3.1%
– North West, £222,715, 4.6%
– Northern Ireland, £183,935, 6.9%
– Scotland, £197,784, 2.4%
– South East, £387,716, 3.0%
– South West, £298,853, 2.7%
– Wales, £210,275, 2.0%
– West Midlands, £248,625, 5.9%
– Yorkshire and the Humber, £201,242, 4.9%