House price growth strengthens

26 April 2007

New figures show that house price growth picked up again in April.  Data from the Nationwide shows that prices rose 0.9%, compared with 0.5% in March.  This takes the annual rate of house price inflation to 10.2%, with the average price of a property in the UK rising to £180,314.

However, the building society warned that over the longer term, house price growth is beginning to cool.  It said prices increased by 2% between February and April, which is the lowest three-monthly growth rate since last August.  Nationwide also said that the number of first-time buyers taking out mortgages fell by 3,200 between December and February, compared with the same period last year.

This latest increase in house prices is likely to increase the pressure on the Bank to raise interest rates, which are widely tipped to up again in May, from 5.25% to 5%.   But the Nationwide cautioned against pushing rates up to 6% and beyond, as it fears this could destabilise the property market.

Its chief economist, Fionnuala Earley, said: “Too sharp a rate hike could undermine market confidence and dry demand up swiftly.”