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UK house price growth slows for first time in six months as end of stamp duty holiday looms

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Lucy Harley-McKeown
·3 min read
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STOKE-ON-TRENT, ENGLAND - NOVEMBER 22: A sold Butter John Bee's estate agents placard on November 22, 2020 in Stoke-on-Trent, England. (Photo by Nathan Stirk/Getty Images)
According to Nationwide’s monthly house price index, annual house price growth slowed to 6.4%, from 7.3% in December. Photo: Nathan Stirk/Getty Images

UK house price growth slowed for the first month in six in January, as the market cooled down ahead of the end of the stamp duty holiday, which runs out in March.

According to Nationwide’s monthly house price index released on Tuesday morning, annual house price growth slowed to 6.4%, from 7.3% in December.

It said prices were down 0.3% month-on-month, after taking account of seasonal factors, and home ownership has risen for third year running.

Robert Gardner, Nationwide's chief economist noted that you would expect housing market activity to weaken months ahead of the stamp duty discount because it can take several months to buy a house, and therefore many looking to buy now will miss out.

Chart: Nationwide
Chart: Nationwide

“The typical relationship between the housing market and broader economic trends has broken down over the past nine months,” Gardner said. “This is because many people’s housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.

“Indeed, the total number of mortgages approved for house purchases in 2020 actually exceeded the number approved in 2019, and house price growth ended 2020 at a six-year.”

Chart: Nationwide
Chart: Nationwide

Alongside a slight dip in house prices, the latest English Housing Survey published by the Ministry of Housing, Communities & Local Government (MHCLG) indicated a slight increase in the home ownership rate in 2020, to 64.6% (from 63.8% in 2019).

This is the third year in a row that the home-ownership rate has increased, though it remains well below its 2003 peak of 70.9%.

Both the number of people owning their home with a mortgage and those owning outright increased compared with a year ago. More than half (54%) of the 15.4 million households in England own their home outright, with the majority (5.2 million or 63%) aged 65 or over.

READ MORE: Top five tips for homebuyers to increase chances of securing a property

As the chart below shows, the 65+ age group has the highest rate of home ownership, at 80%.

Lucy Pendleton, property expert at independent estate agents James Pendleton, said: “Forget the mild monthly price decline, this is hardly the performance of a market in peril.

“The fact that most buyers agreeing purchases now will almost certainly miss out on stamp duty relief has barely moved the needle so there are wider factors at work here and chances are they’ve been cooking up a storm all along.”

The news comes alongside data released on Monday from the Bank of England which showed that mortgage approvals had risen to a 13-year high.

Mortgage borrowing was £5.6bn ($7.7bn) in December, broadly unchanged on November. Mortgage approvals across the whole of 2020 rose by 3.7% to 818,500.

Watch: Am I wasting my money by renting?