HOUSE prices increased by 7.8% in 2014 but the pace of growth in property values is expected to slow this year, the Halifax has reported.

On a month-on-month basis, average UK property prices rose by 0.9% between November and December, pushing them to £188,858 typically.

Halifax predicts the pace of growth in values will cool further in the coming months, meaning that property prices will increase by between three and 5% during the whole of this year.

The year-on-year increase in property values has been gradually slowing down since it reached a peak of 10.2% in July.

Halifax housing economist Martin Ellis said housing demand from would-be buyers has been dampening since the summer, which has led to a reduction in both house price growth and property sales.

He said the slowdown is due to a combination of factors, such as a deterioration in affordability for homebuyers as a result of rising house prices, relatively low earnings growth and speculation over exactly when interest rates are likely to start rising, which will have the effect of pushing up mortgage costs.

Mr Ellis said: “Housing demand, however, should continue to be supported by a growing economy, rising employment levels, still low mortgage rates and the first gain in ‘real’ earnings for several years.”