2 February 2021

House price growth slows in January as stamp duty holiday comes to an end

The runaway housing market is starting to show the first indications of taking a foot off the gas, according to Nationwide Building Society. The lender reported that the annual rate of growth slowed ‘modestly’ in January, with prices falling 0.3 per cent month-on-month, the first monthly decline since June. Meanwhile, annual house price growth slowed to 6.4 per cent from 7.3 per cent in December.

It comes after a stonking performance in 2020 when the remarkable resilience of the market in the face of the pandemic was evident, despite the first national lockdown. With more mortgages approved for house purchase in 2020 than the previous year, the determination of buyers to move for more space – both inside and out – was evident. House price growth was also at a six-year high, even though the economy contracted by 10 per cent and unemployment was also slightly higher.

Nationwide believes the tapering of demand ahead of the end of the stamp duty holiday next month is behind the slowdown in January, with many people having brought forward their decision to move.

The next few months will be interesting. As we head towards the end of the stamp duty holiday, and with the government seemingly reluctant to extend it, lenders are navigating a fine line between the need for volume and market share versus risk appetite and service. There is a certain amount of chopping and changing on rates and products as lenders deal with unprecedented circumstances.

However, with interest rates unlikely to rise anytime soon, mortgage rates should remain competitive. As always, it is important to seek advice before taking the plunge.

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