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Nationwide says May rate rise 'looks certain'

27 April 2007
Three successive interest rate increases have failed to bring rising house price growth back under control, the latest Nationwide house price figures show.

In April, the pace of house price growth picked up to 0.9 per cent, almost double the rate of growth in March.

The annual rate of inflation rose back into double digits at 10.2 per cent and the average house price hit £180,314.

A May base rate rise now seems overwhelmingly likely, commented Nationwide's chief economist Fionnuala Earley.

"The acceleration in house prices during the month makes a rate rise on the MPC's [monetary policy committee's] tenth anniversary look like a certainty," Ms Earley said.

But she cautioned that hiking interest rates too rapidly could destabilise the housing market and make it difficult for homeowners to keep up with mortgage repayments.

Tracker mortgage holders in particular would struggle to repay if the interest rate rose as high as six per cent, as some analysts are demanding, she predicted.

Moreover, Nationwide emphasised that longer-term underlying trends showed house price growth was slowing.

"The three-monthly growth rate, which smoothes the volatility of the monthly series, is still cooling in response to the earlier rises in interest rates," she commented.

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