House prices in first annual fall for 11 years, says the Halifax

House prices have fallen by 1% compared with a year ago - the first such drop since 2012, according to the UK's largest mortgage lender.

The Halifax, part of Lloyds Banking Group, said typical house prices in May were down £3,000 on a year ago, and £7,500 lower than their peak in August.

The lender, which itself is raising its mortgage rates, said higher borrowing costs were hitting "confidence".

Some mortgage rates have risen sharply in recent weeks.

Lenders are predicting further rises in the Bank of England's base rate, owing to general price rises - as measured by inflation - staying higher for longer than previously anticipated.

"This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations," said Kim Kinnaird, director of Halifax Mortgages, who added that housing demand was cooling.

"Therefore further downward pressure on house prices is still expected."

The Halifax said that the average UK home now cost £286,532. It said that prices had edged down slightly compared with a month ago. A buoyant market a year ago was a major reason for the year-on-year fall, it said.

Rival lender the Nationwide has recorded a deeper fall in house prices, according to its data. It said a week ago that property values were down in the year to May by 3.4%, the biggest decline for 14 years.

Although that may be welcomed by first-time buyers, higher than expected mortgage rates are squeezing their purchasing power.