The average price of a British home rose 0.9pc from November to December to £188,858 continuing a six-month trend of falling annual growth rate.
Values in the last three months of 2014 were 0.3pc higher than in the previous three months, making December the fifth consecutive month in which the quarterly rate of increase declined.
Martin Ellis, housing economist at Halifax said the figures showed a market where house prices have outstripped wage inflation and hit an affordability ceiling for many parts of the UK.
“The deterioration in housing affordability as a result of rising house prices, earnings growth that has been consistently below consumer price inflation until very recently and speculation of an interest rate rise, have combined to temper housing demand since the summer," he said.
"The weakening in housing demand has led to a reduction in both price growth and sales in recent months."
Nonetheless, on the streets of Britain, estate agents are seeing buyers come in with "hard" and "spiteful" offers - according to the founder of the online agent, eMoov, Russell Quirk.
"It is a very mixed bag across the UK with carnage in central London but some buoyancy in commuter land," said Mr Quirk.
"There is still some delusion among sellers and with flat growth predicted for this year [as a UK average] they need to reduce prices to stay in sync with the market and successfully sell their homes."
Home sales fell below the 100,000 mark to 98,490 in November, although this is to be expected in the build up to Christmas, the lender said.
Mortgage approvals and demand for home loans have also continued to fall.
The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – fell in November, to 59,029. Approvals have now fallen by 23pc from 76,611 in January 2014.
The graph below from the Halifax shows the correlation between falling mortgage demand and falling house price growth and follows similar data from the Bank of England, released earlier this week.
"It's [the fall of sales to below 100,000 for the first time since November 2013] moderately disappointing," said Adam Challis, head of residential research for property group JLL, blaming the reticence in the market on pre-election inertia.
"We expect sales to improve in 2015 and hit between 1.2m and 1.3m transactions for the year."