Fastest rise in house prices in two years

26 February 2004
UK house prices surged by 3.1 per cent during February, the fastest rate in nearly two years, a new survey has revealed.

Research conducted by Nationwide found that the British housing market is showing no sign of cooling off, with prices soaring by 17.1 per cent over the past year.

The mortgage lender announced that house prices rose by 3.1 percent in February, the strongest monthly pace since April 2002. Prices in January rose by 0.7 percent on the month and by 14.3 percent on the year, Nationwide revealed.

The Bank of England is now expected to announce a further rise in the rate of borrowing next year, in a bid to stop the housing market overheating. The bank's Monetary Policy Committee has already raised the base rate of interest twice in the past three months to four per cent.

Alex Bannister, Nationwide group economist, said: "This acceleration is a little surprising, given affordability concerns, but probably reflects buoyant employment and a continued lack of property supply. Although the market is set to remain strong in the near term, by the end of 2004 we expect a deceleration in property price growth caused by lower income growth and higher interest rates."

Nationwide said the average house cost £138,730 in February compared with £134,806 the month before, with an average rise of around £20,000 over the past year. The building society's survey also showed that house price increases in London and the South were muted during February, while some areas of the North saw rapid gains.