UK house price growth was only 0.2% during the month of April with lower annual returns suggest a slowdown in the property market.

House price index figures from the Nationwide for April show growth was 0.2% for the month compared to 0.7% the previous month.

It means annual growth is now in a narrow range of between 3% and 5% as seen during the summer of 2015 with average yearly UK price rise of 4.9% reducing from 5.7% last month.

For first time buyers it gives them more time to raise a deposit before their desired property is beyond their reach. This can also apply to home movers as often the gap to their next home increases at a faster rate.

Recent surge in property market

Robert Gardner Chief Economist of Nationwide, said the recent surge in property transactions is due to changes in stamp duty tax from April 2016.

The additional tax is applied to second homes and buy-to-let landlord purchases resulted in a record 165,400 transactions in March to beat the deadline compared to 149,000 in January 2007.

According to the Council of Mortgage lenders there was a sharp rise of 43% in mortgage lending from £18 billion in February to £26 billion in March although well below the all time high of £34.9 billion in June 2007.

Mr Gardner says, the data for transactions and mortgage lending suggests that while buy-to-let lending has risen strongly a large proportion of the boost to the property market is from cash buyers.

Since the financial crisis of 2008 cash purchasers have become a significant part of the property market representing 35% of all transaction, up from 25% in 2007.

House purchases likely to fall

The surge in house transactions for March is likely to result in a fall in the next few months as many purchasers brought their purchase forward to beat the stamp duty tax.

It may be easier for remortgage buyers to stay in your existing home if you can and avoid the cost of moving.

In addition the buy-to-let market will be subject to further policy changes including a reduction in tax relief for landlords in 2017 which is likely to add to a slowdown in the property market.

The surge in transactions could mean fewer properties available on the market adding to a shortage in housing stock already close to all time lows.

There may be fewer suitable homes on the market as equity release mortgage buyers avoid downsizing and access cash from their home for holidays, home improvements or help children start or expand a business.

This shortfall may not increase house prices in the short term as there is the vote in the EU referendum.

Simon Rubinsohn the chief economist at Royal Institute of Chartered Surveyors (Rics), said elections bring periods of uncertainty in markets and are likely to dampen down the outlook, in particular for London.

In a recent Rics survey the number of surveyors anticipating a fall in property price exceeded those predicting a rise by 38%.

Although the short term is negative for transactions and house prices, over the medium term there remains an imbalance between demand and supply and Mr Rubinsohn expects a 25% rise in prices in the next five years.

What are your next steps?

Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.

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