House prices unchanged in January

The figures are the latest to highlight slowing house price growth

House prices were unchanged in January compared to the previous month, according to the Halifax bank.

However, the country's biggest mortgage lender said that house prices were rising at an annual rate of 4.5%.

The gain in annual house price growth pushed the value of the average UK home to £197,244 - a rise of £7,628.

The bank said that there were continuing signs of weakness in housing market activity and that the market would be flat during the year.

The figures are the latest to highlight a slowing in UK house price growth, after a decade of near record-breaking increases.

Slowing growth

Problems in global financial markets, weakening consumer demand, higher interest rates and increases in petrol and food costs have all combined to rein in growth.

The Halifax said it expected the Bank of England to cut interest rates twice during 2008, which should prevent the economy slowing too sharply and support the housing market.

Martin Ellis, Halifax chief economist, said: "We expect sound economic fundamentals and lower interest rates to support house prices. Nationally, we predict that house prices will be flat in 2008."

The Bank of England is due to meet later this week to discuss UK interest rates. Many analysts are predicting a cut of a quarter of a percentage point, to 5.25% from 5.5%.

Quarterly fall

Despite the annual growth and prices remaining unchanged in January, the Halifax said there was evidence of a longer term slowdown.

It said that prices fell by 1% in the three months to the end of January compared to the previous quarter.

This was the third successive fall in prices on a three-month basis.

Many analysts look at the three month figure as a more accurate measure because they say it is less volatile and gives a better picture of long term trends.

Annual house price inflation was 4.5%, down on the previous month's figure of 5.2%.

Trend

This latest report follows warnings from other groups about the housing market.

Last week, rival mortgage lender Nationwide said prices fell by 0.1% during January.

"The Halifax and Nationwide data indicate that, while house prices are cooling significantly, they are currently not plunging through the floor," said Howard Archer, chief UK and European economist at Global Insight.

"Nevertheless, the housing market is clearly buckling under substantial pressure from increased affordability constraints and tightening lending practices."

And Ed Stansfield, property economist at Capital Economics, said: "With affordability pressures still elevated and tighter lending criteria likely to curtail prospective home-buyers' purchasing power, we do not expect this pause to be prolonged."

"Further falls in house prices are more likely than not, over the rest of 2008."

In recent weeks, the Royal Institution of Chartered Surveyors (Rics) reported that the cost of getting on to the housing market has risen by about 350% from its most accessible point in 1996.

The Financial Services Authority (FSA) also warned that a million homeowners could struggle to repay their home loans over the next 12 months.