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House price growth slows to 0.3% in January

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UK house prices increased by 0.3% in January, down from 0.8% the previous month, according to Nationwide.

Annual growth remained steady at 4.4% in January compared with 4.5% in December.

The average house price is now £196,829, the building society said.

Robert Gardner, Nationwide’s Chief Economist, said: “As we look ahead, the risks are skewed towards a modest acceleration in house price growth, at least at the national level.

“The labour market appears to have significant forward momentum. Employment has continued to rise at a robust rate in recent months and, while the pace of earnings growth has slowed somewhat, in inflation-adjusted terms regular wages continue to rise at a healthy pace.

“With this trend expected to continue and with interest rates also likely to stay on hold for longer than previously anticipated, the demand for homes is likely to strengthen in the months ahead.”

He warned construction activity will “lag behind” strengthening demand, “putting upward pressure on house prices” and eventually reducing affordability.

“Indeed, the market is already characterised by a shortage of stock, with the Royal Institute of Chartered Surveyors reporting that the number of properties on estate agents’ books remains close to all-time lows.”

Mortgage borrowing 

Meanwhile, total mortgage borrowing reached £12.4bn in December, a 24% rise on the same time the previous year, the British Bankers’ Association (BBA) said.

Eddie Goldsmith, chairman of the Conveyancing Association, said there has been a considerable rush to secure mortgage finance, particularly by landlords, in order to complete by 31 March and save on Stamp Duty Land Tax (SDLT) costs.

In the Autumn Statement, the Chancellor announced a 3% surcharge which will apply to second homes and buy-to-lets from 1 April.

Goldsmith expects mortgage borrowing and approvals to continue to rise during the first quarter of 2016, but a ‘tail-off’ in demand may occur once the SDLT premium kicks in.

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