Nationwide finds continued house price growth

04 April 2003
House prices in the UK have continued to grow according to the latest survey from the Nationwide, contradicting other surveys that have seen signs of a slowdown beginning.

The Nationwide found that house prices in March grew by 1.9 per cent, compared to a 0.4 per cent rise in February. The survey found that the average house price now stands at £122,180.

A survey by the mortgage lender, Halifax, yesterday, found that house prices in March grew by 1.1 per cent compared to 1.8 per cent growth in February. The Halifax claimed that the cooling of house price growth was due to a large number of properties coming on to the market.

The Nationwide found no such cooling effect on the market. They found that house price growth remains buoyant although the trend over the last few months has moderated.

House sales were down 5 per cent in the twelve months to February, and lending for house purchase remained close to the high levels seen a year ago with around £7.1 billion advanced in February. In addition, remortgaging was found to have continued to grow at an exceptionally fast pace - February saw remortgaging of £8.5 billion a 55 per cent increase on the same period a year ago.

The Nationwide predicts that the housing market will continue to grow during 2003 but at a slower annual rate of 10 per cent compared to the present annual growth rate of 26.2 per cent.

Nationwide's Group Economist, Alex Bannister, claimed that interest rates would remain close to their current levels when they had predicted that they would rise to 4.5 per cent. Mr Bannister argued that although consumer confidence has fallen because of fears about the effect of the war on Iraq, it would not fall to the levels seen during the Asian crisis in 1998 and following September 11th 2001.

Mr Bannister commented, 'Our view is that a more sustained and significant fall in confidence would have to occur before there was any suggestion that expectations and confidence factors would reduce house price growth.'

'For this to occur we would have to see a marked change in the perception of domestic trends. Given that we foresee only a modest deterioration in the prospects for income, employment and interest rates we do not think this likely. Our forecast for 2003, therefore, remains unchanged at 10 per cent.'

The Nationwide also found that house prices in the North East are growing at a much faster rate than properties in London and the South East. London remains in eleventh place out of 13 regions in the Nationwide's growth league table. In contrast, the North East saw annual inflation of 36.5 per cent - its highest rate since the third quarter of 1989.

This reflects the finding of the Halifax who claimed that the East Midlands saw the biggest increase in house prices (34 per cent) followed by the North (31 per cent) and Yorkshire and the Humber (28 per cent). Greater London slipped down the Halifax's regional house price inflation table in recent months with a 19 per cent rise over the past year putting the capital ninth out of the 12 UK regions.