Halifax raises price forecast for 2007

Halifax Bank of Scotland has increased its forecast for house price growth in 2007 from four per cent to six per cent.

The group said that its adjustment is largely due to the fact that growth in the first four months of the year was greater than expected.

Halifax also pointed out that inflation of six per cent across the year would be one of the smallest rises since 1995 and predicted that house price growth will actually moderate in the second half of the year.

This forecast was attributed to increases in mortgage rates since last summer, which have limited housing affordability and put pressure on homeowners' finances.

Martin Ellis, chief economist with the bank, said: "Whilst house price growth was stronger than expected during the early months of 2007, there are now more signs that the market is slowing.

"We expect this trend to continue. House price inflation should ease over the second half of the year."

Halifax also predicted that inflation would fall back towards the government's two per cent target before the end of 2007 and that interest rates will reach at least six per cent this year.

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