House prices were weak at the start of the year. A 0.6 percent monthly drop in the Nationwide's gauge was double the the market consensus and, following a sharper revised 0.3 percent fall in December, reduced annual inflation from 2.8 percent to 1.1 percent. This was the fifth successive monthly decline and leaves prices 3.2 percent below last August's peak.

The January data put the quarterly change at minus 2.3 percent, down from minus 1.8 percent in the fourth quarter and providing further evidence that prices are on a declining trend. Looking ahead, mortgage rates have fallen since September's disastrous mini-budget but approvals are back close to levels seen during the pandemic and affordability is a major issue. Supply shortages will continue to provide some fundamental support but 2023 will probably see a sizeable correction in house prices.

More generally, today's update reduces the UK's ECDI and ECDI-P to minus 55 and minus 70 respectively. Neither reading will stop the BoE raising Bank Rate again on Thursday but overall economic activity is now falling well short of market expectations.

Prices are seen falling a further 0.3 percent on the month in January.

The Nationwide House Price Index (HPI) provides house price information derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted; that is, they track a representative house price over time rather than the simple average price.

Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.

Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.