The growth in UK house prices slowed unexpectedly last month, Nationwide said, as it warned buyers to expect a rush in transactions early next year sparked by changes to stamp duty rules in the budget. The building society’s monthly index showed that annual house prices grew at a rate of 2.4% in October, a slowdown from the near two-year high of 3.2% recorded in September. This was still the third highest rate of annual growth since December 2022, but was lower than experts had forecast, with a Reuters poll of economists predicting a 2.8% increase for the month. The average house in the UK cost £265,738 in October, a 0.1% increase from September. Robert Gardner, Nationwide’s chief economist, said market activity remained resilient, with mortgage approvals approaching pre-pandemic levels, despite a significantly higher interest rate environment. The Bank of England is widely expected to cut interest rates next week from 5% to 4.75%. Some banks have already started cutting mortgage rates, with Santander reducing all rates by 0.36% on Friday and Clydesdale cutting some products by 0.20%. Others have increased rates, though, with Virgin increasing rates after the budget by 0.15%. In its economic outlook, published alongside the budget on Wednesday, the Office of Budget Responsibility said it expected interest rates to rise from from about 3.7% in 2024 to a peak of 4.5% in 2027. Gardner warned that the chancellor’s decision to remove the temporary increase to the nil rate for stamp duty next April could spark a rush to complete purchases before the changes. In September 2022, the government temporarily increased the nil rate of stamp duty, the amount before you have to start paying stamp duty on a purchase, for homebuyers, raising the nil rate for first-time buyers from £300,000 to £450,000, and for those buying an additional home from £125,000 to £250,000. Rachel Reeves said during her budget on Wednesday that this would be scrapped from 31 March next year. Gardner said: “The main impact of the stamp duty changes is likely to be on the timing of property transactions, as purchasers aim to ensure their house purchases complete before the tax change takes effect. “This will lead to a jump in transactions in the first three months of 2025 (especially March), and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.” During the Covid pandemic, the then chancellor, Rishi Sunak, announced a stamp duty holiday to reinvigorate the property market, which resulted in an increase in activity during the window, particularly in the months before it came to an end. Gardner said that the swings in activity were likely to be less pronounced as the temporary changes to the nil rate have been in place for a longer period of time, with their planned expiry well known. Nationwide estimates that the stamp duty changes will affect one in five first-time buyers, with this increasing to two in five in the south-east of England. Gardner added: “The chancellor also announced an increase in the higher rate of stamp duty for additional dwellings by two percentage points to 5%, which took effect on 31 October. “Based on data for the year to June 2024, this would affect about 194,000 transactions, about one in five residential transactions in England and Northern Ireland.”