A cooler note was detected in Nationwide?s latest housing market report, as the effects of last autumn?s interest rate rises began to bite. Although house prices rose again in January, it was by a relatively small margin, suggesting a slowing market. Property experts believe the market will remain solid for 2007 but expect the cooler trend to continue.

House prices rose by 0.3% in January according say Nationwide, the smallest monthly rise since May 2006. The latest figures compare poorly to last January when house prices grew by 1.4% and have brought the annual rate of growth down from 10.5% to 9.3%.

But property experts are still reasonably optimistic: ?Base effects suggest that, barring a drastic shift in market momentum, annual house price growth on this measure will remain solid in the near term,? explained Kelvin Davidson from Capital Economics. ?Indeed, if house prices were to continue to rise by 0.3%m/m in the next few months, the annual growth rate would remain at around 9% until into the second quarter of the year.?

The effects of last autumn?s interest rate rises are beginning to appear in the data, say experts, but the full impact is yet to be reflected. This factor, coupled with the further rate rise predicted in the near future, is prompting experts to forecast a cooling market for the remainder of the year.

?2007 started off with a bang as the Bank of England raised interest rates for the third time in six months,? said Fionnuala Earley, Nationwide’s chief economist. ?Only time will tell how much the surprise decision will affect sentiment in the housing market, but even before January’s rate rise there were already some very early signs of cooling.?