After falling by 1.1% in May, prices fell by 2.6%. The average price of a home in the UK now stands at £285,932, down from a peak of £293,992 in August of last year. This was the largest decline since June 2011. 

After falling by 0.2% the month prior, prices fell by 0.1% for the entire month of June. 

"Concerns about persistent inflation have led to a significant increase in the cost of funding," said Kim Kinnaird, director of Halifax Mortgages. “This, together with the base rate increasing by a further 50 basis points, caused a significant increase in typical mortgage rates during the past month.” 

"As consumers weigh their financial options, the consequent squeeze on affordability will surely act as a brake on demand. Even though there is always a lag when rates rise, many current homeowners with variable mortgages or who are moving away from fixed rates will probably see an increase in the coming year.” 

It's difficult to estimate how severe or long the decline in home values will last, she added. As energy and food prices appear to be reversing their sharp increases, consumer price inflation is likely to decline in the near future, but core inflation is unquestionably proving to be stickier than initially anticipated. 

Mortgage rates are likely to stay higher for longer as markets currently anticipate a peak in the Bank Rate of over 6%, and the strain on household budgets will continue to drive down home values during the ensuing year. 

(Sources: investing.com, sharecast.co.uk, halifax.co.uk)