UK house prices have defied expectations by growing slightly in June but annual prices fell at the fastest rate since 2009 as soaring mortgage costs took a toll on the market, according to Nationwide building society.

The surprise monthly rise of 0.1% reversed a 0.1% fall in May and confounded economist forecasts of a 0.3% fall. It pushed the average cost of a house in the UK up slightly to £262,239.

Prices were 3.5% lower in June compared with a year earlier, the sharpest rate of decline since 2009 but a smaller annual drop than the 4% fall predicted by economists.

Two-year fixed-rate mortgage rates have continued to climb past 6% after the Bank of England increased interest rates by half a point to 5% in June in an attempt to curb stubbornly high inflation. The average two-year fixed deal edged higher again on Friday, to 6.39% from 6.37% the day before, according to Moneyfacts. The average five-year fix rose to 5.96% from 5.94%.

The high rates are putting pressure on the ability of prospective homeowners to buy properties, with signs it is also starting to force some sellers to accept lower offers, according to Zoopla.

“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term,” said Robert Gardner, the chief economist of Nationwide. “Longer-term borrowing costs have risen to levels similar to those prevailing in the wake of the mini-budget last year but this has yet to have the same negative impact on sentiment.”

Gardner noted that mortgage payments as a share of take-home pay were well above the historical average, and prospective buyers were also finding it increasingly difficult to save as the cost of living crisis continued to hammer household budgets.

“Despite the higher interest rates available to savers, the sharp rise in rents, together with continued high rates of inflation more generally, is continuing to make it difficult for many prospective buyers to save for a deposit,” he said. “Nevertheless, a relatively soft landing is still possible, providing the broader economy performs as we (and most other forecasters) expect.”