House prices continued to rise last month but there are new signs that the property market is set for a slowdown.
The average home in the UK now costs £188,623 after prices rose by 1.3 per cent in January, meaning that annual house price inflation stood at 9.9 per cent, according to the Halifax monthly property price index.
However, two key factors point to a future slowing of a market that has boomed since the middle of last year.
The number of mortgage approvals dropped from 129,000 in November to 113,000 in December and new buyer enquiries fell in the last month of the year for the first time since May 2005.
This suggests that both homeowners and first-time buyers are beginning to take a step back from the market and wait for a more opportune time to make that crucial step up the housing ladder.
Halifax's chief economist Martin Ellis predicted: "Negative real average earnings growth for only the second time in over ten years, combined with higher interest rates and slower economic growth will squeeze householders' finances, causing potential homebuyers to be more cautious and constraining housing demand."
The bank now expects annual house price growth to ease to four per cent by the end of the year.
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