House prices dipped by 0.2 per cent in January, as analysts predicted that the market could tilt further in buyers' favour over the coming months.

The typical house price is £162,228, following the second monthly drop in a row after a 0.2% fall was also recorded in December, Nationwide's latest house price index said.

But the lack of new homes coming to market means prices are likely to drop only modestly or move sideways in the near future, the building society said. Buyers are being offered some of the cheapest ever mortgage deals, with initial mortgage payments running at their most affordable level since 2003.

But Nationwide said the weakness in demand from buyers was partly due to the hurdle many face in finding a deposit. Household budgets have been under intense pressure due to high living costs and deteriorating employment conditions.

Borrowers are also expected to have a tougher time raising a mortgage this year as lenders tighten their criteria amid the weak economic backdrop, however record low deals offered by lenders as the Bank of England keeps the base rate at a historic low have improved affordability to some extent.