LONDON, Feb 1 Reuters British house prices dropped by a biggerthanexpected 0.6 in January and are now 3.2 below their peak in August, following a surge in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society said on Wednesday.

January39;s decline in house prices was the fourth drop in a row the longest unbroken run of declines since 2009 and the fall was twice the size expected in a Reuters poll of economists, adding to signs that the market is slowing rapidly.

Prices in the three months to January were down 2.3 compared with the previous three months, the largest such drop since the three months to April 2009.

Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss39;s mini budget, which sent market interest rates soaring.

It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks, Nationwide chief economist Robert Gardner said.

Nationwide forecast in December that house prices would fall 5 in 2023.

House prices in January were 1.1 higher than a year earlier, Nationwide said, the smallest yearonyear increase since June 2020 and down from a 2.8 increase in December. Economists polled by Reuters had expected a rise of 1.9….