LONDON (Reuters) - British house prices rose at a slower pace than expected in January after a fall in mortgage approvals the month before, although mortgage lender Nationwide said on Wednesday that momentum should pick up in 2016 as a whole.
House price growth cooled to 0.3 percent month-on-month from December’s eight-month high of 0.8 percent, causing year-on-year growth to drop to 4.4 percent, Nationwide said — below average expectations in a Reuters poll.
The British Bankers’ Association — which represents most major lenders, though not Nationwide — said mortgage approvals in December for house purchase dropped to a seven-month low of 43,975 on a seasonally adjusted basis.
Britain’s housing market played a big role in past economic booms although the Bank of England currently sees little danger to financial stability apart from “mild concern” about a surge in lending to fund investment properties.
BBA data also showed a drop in net credit card lending in December from November, in line with earlier soft retail sales figures.
“The housing market has come modestly off the peak levels seen around August. It may also be that a shortage of properties on the market is limiting housing market activity,” IHS Global Insight’s chief UK economist Howard Archer said.
Nationwide said house price growth looked likely to pick up modestly in the months ahead, fueled by a shortage of new homes to meet demand and as Britain’s labor market continues to firm.
“(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,” Nationwide’s chief economist Robert Gardner said.
“The concern remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.”
Other gauges of house prices have also pointed to renewed momentum in the market after tougher rules on mortgage borrowing introduced in 2014 temporarily cooled the pace of house price inflation.
Nationwide’s measure of annual house price growth shows weaker price rises than the most recent official figures, which showed a 7.7 percent annual rise in November, and rival Halifax, whose measure showed a 9.5 percent rise in the fourth quarter.
Editing by Catherine Evans