Nationwide sees house prices 'cooling'

31 January 2007
The housing market showed its "first signs of cooling" in January as prices increased by 0.3 per cent, the lowest monthly rise for eight months, Nationwide statistics suggest.

The annual rate of house price growth climbed down into single digits for the first time since last May, hitting 9.3 per cent against 10.5 per cent in December.

"Even before January's rate rise there were already some very early signs of cooling," commented Nationwide chief economist Fionnuala Earley.

She conceded that, for now, supply continued to fall more quickly than demand, which exerts an upward pressure on prices, but added: "Eventually the slower demand will ease the rate of house price growth to more sustainable levels."

Discussing whether a further base rate rise was on the cards, Ms Earley anticipated that the most likely option "by a tiny margin" was that rates would remain at 5.25 per cent.

"It is an extremely close call between rates remaining unchanged and rising once more, but higher rates will undoubtedly add to the first signs of cooling," she predicted.

Nationwide predicts that 2007 annual house price growth will be at "the lower end of our five per cent to eight per cent forecast".

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