British house prices rose again in January to more than reverse December's drop, but the annual rate of increase fell to its lowest in three years, the Nationwide building society said today.
The mortgage lender said average prices rose a seasonally adjusted 0.4 per cent this month after a 0.2 per cent drop in December, leaving them 12.6 per cent higher than a year ago, the weakest annual rate since January 2002.
Economists said the figures suggested that although the housing market was clearly slowing, it was not collapsing.
"This is the way the housing market seems to be going, cautious buyers but no forced sellers," said Mr John Butler, UK economist at HSBC.
"The correction in the housing market that has to come is more likely to take the form of low transactions than tumbling prices."
Many commentators had been worried about a more serious crash in house prices after a prolonged boom that saw prices double over five years. But tough talk and five interest rate rises in less than a year from the Bank of England (BoE) appear to have slowed the market since the summer last year.
But BoE policymakers noted earlier this month that recent house price indices had turned out slightly stronger than expected.
Nationwide also said there were indications that sentiment in the housing market may be about to turn more positive as many have taken the view that interest rates, at 4.75 per cent since August, have peaked and the next move may be down even if not for some time.