"Housing demand appears to have been curbed in recent months due to a deterioration in housing affordability driven by the sustained period of rapid house price growth during 2014-16."
The annual rate is now less than half the 10.0% peak reached in March 2016.
The data shows that house prices in the three months to April were 0.2% lower than in the previous three months, marking the first quarterly fall since November 2012.
Martin Ellis, Halifax housing economist, said: “House prices have stagnated over the past three months. Overall, prices in the three months to April were marginally lower than in the preceding three months; the first quarterly decline since November 2012. The annual rate of growth remained at 3.8% in April, the lowest rate since May 2013.
“Housing demand appears to have been curbed in recent months due to a deterioration in housing affordability driven by the sustained period of rapid house price growth during 2014-16. Signs of a decline in the pace of job creation, and the beginnings of a squeeze on households’ finances as a result of increasing inflation, may also be constraining the demand for homes.
“A continued low mortgage rate environment, combined with an ongoing acute shortage of properties for sale, should nonetheless help continue to underpin house prices over the coming months.”
Jonathan Samuels, CEO of Octane Capital, commented: "Rising inflation is without doubt hitting demand for property, as prospective buyers start to feel the pinch. But there are other forces at play. The property market is experiencing an affordability hangover from the price growth of recent years, while ongoing Brexit negotiations and cross-Channel spats are also creating uncertainty.
"Combine the rising cost of living with muted wage growth, add in political and economic uncertainty, and a period of prolonged house price stagnation is a real possibility.
"Yes, the lack of supply will prevent prices from falling sharply, and record low mortgage rates will continue to provide support but for now this remains very much a sideways moving market.
"With the General Election approaching, it's hard to see any material uplift in activity until the Autumn. A lot is riding on the direction of inflation."
