House prices in the UK experienced an unexpected dip in February as demand from buyers waned, according to mortgage lender Halifax. This slowdown comes after a period of heightened

activity driven by homebuyers rushing to complete purchases before the end of tax incentives on March 31.

Halifax reported a 0.1% decline in house prices last month, following a revised 0.6% increase in January. This drop was below all forecasts in a Reuters poll of economists. Additionally, both the monthly and annual figures for January were slightly adjusted downward.

Amanda Bryden, head of mortgages at Halifax, highlighted the fragile state of the housing market.

"February’s data underscores the delicate balance in the UK property sector," Bryden said. "While there was speculation about a last-minute surge in mortgage applications ahead of the stamp duty changes, it's inevitable that some of the demand brought forward is now beginning to fade as the April deadline approaches, given the time required to finalize a purchase."

At the beginning of 2024, some indicators suggested a resurgence in housing demand, driven by lower borrowing costs and the impending expiration of temporary tax incentives. These incentives primarily benefited buyers of lower-priced homes and first-time homeowners.

Data from the Bank of England, released on Monday, showed that net mortgage lending in January recorded its largest increase since September 2022. The central bank is expected to maintain interest rates at 4.5% this month, with investors anticipating approximately two quarter-point rate cuts later in the year.

Halifax’s annual house price index showed a 2.9% rise compared to the previous year, matching January’s rate but slightly below the 3.1% growth forecasted by economists.

In contrast, rival lender Nationwide reported a more significant annual increase of 3.9%, with a 0.4% rise in February.

Despite the recent slowdown, Bryden expects house prices to continue their upward trend, albeit at a slower pace than in 2024, citing ongoing affordability challenges.

A Reuters poll conducted last month projected a 3.5% rise in UK house prices this year, with a further 4% increase anticipated in 2026.