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| UK house prices 'start to cool' | UK house prices 'start to cool' |
| (about 1 hour later) | |
| House prices rose by 0.3% in January, the slowest pace for eight months, according to the Nationwide. | House prices rose by 0.3% in January, the slowest pace for eight months, according to the Nationwide. |
| The modest rise cut the annual rate of house price inflation to 9.3%, down from December's figure of 10.5%. | The modest rise cut the annual rate of house price inflation to 9.3%, down from December's figure of 10.5%. |
| The building society said the market was showing its first signs of cooling following recent interest rate rises. | The building society said the market was showing its first signs of cooling following recent interest rate rises. |
| "It is likely that we will now begin to see a weakening in demand as a result of stretched affordability and rising interest rates," Nationwide said. | "It is likely that we will now begin to see a weakening in demand as a result of stretched affordability and rising interest rates," Nationwide said. |
| Earlier this month, the Bank of England lifted its base rate to 5.25% from 5%. The shock move was the third quarter-point increase since the beginning of August. | Earlier this month, the Bank of England lifted its base rate to 5.25% from 5%. The shock move was the third quarter-point increase since the beginning of August. |
| "Only time will tell how much the surprise decision will affect sentiment in the housing market, but even before January's rate rise there were already some very early signs of cooling," said Fionnuala Earley, Nationwide's chief economist. | "Only time will tell how much the surprise decision will affect sentiment in the housing market, but even before January's rate rise there were already some very early signs of cooling," said Fionnuala Earley, Nationwide's chief economist. |
| Mixed signals | |
| Among the factors suggesting that the market may be cooling, the Nationwide pointed to a recent fall in new buyer enquiries, a slowdown in recently agreed sales and a lengthening of the time that properties stay on the market. | |
| This emerging slowdown is reflected in a comparison of prices during the last three months with those of the preceding three months. | |
| This "three-month on three-month" rate was 3.3% in January according to the Nationwide, just the same as in December, after rising steadily since the middle of last year. | |
| However, mortgage approvals, a key indicator of short term trends, are at their highest for nearly three years. | |
| Thus other commentators expect the UK property market to stay buoyant this year. | |
| A shortage of new houses and big bonuses for City workers are among the factors predicted to keep prices high. | |
| Nationwide said that the main risk to prices was a sudden drop in confidence following the recent rate rises. | |
| "However, the more likely outcome is that the market will remain fairly stable but slow a bit more quickly than we initially expected," said Ms Earley. | |
| "This would bring our expectation of house price growth in 2007 into the lower end of our 5-8% forecast." |