Banks predict house price slow-down
09 March 2004
A quick correction is likely to occur in house prices according to an official at the Bank of England.
Reports from the Halifax and the Nationwide building society have suggested that house price inflation has begun to gather pace, with the latest Halifax measure putting year-on-year growth at nearly 18 per cent last month.
And government figures support this analysis. The Office of the Deputy Prime Minister has estimated that annual prices inflation reached 9.7 percent in January alone.
Many people believe there are signs of trouble in these huge rises.
"The longer house prices continue to rise a lot faster than incomes, the more probable that there would be a relatively sharp correction," Stephen Nickell of the interest rate setting Monetary Policy Committee, told Reuters.
The Bank of England has predicted that house price inflation will decrease to zero over time.
The housing boom was a factor in the Bank of England's decision to raise interest rates to four per cent in February and could prompt further rate rises later this year.