Housing growth may have to be revised upwards
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Your support makes all the difference.Britain's biggest building society admitted yesterday it might have to revise its forecast for house prices this year after its research showed the market had continued to grow.
Nationwide said it would have to raise its target of 6 per cent growth this year, which it set in December, if its rivals stoked up a boom by relaxing their lending rules.
The warning came as Nationwide said the average home price rose 0.2 per cent in January. Although this was much slower than December's 1.9 per cent, the society said the market was buoyant.
"Despite pessimistic news from the global economy and the UK manufacturing sector, the housing market is holding up well," said Alex Bannister, Nationwide's group economist.
He said he was still confident annual growth in house prices would slow from 13.8 per cent last year – the highest since 1988 – to about 6 per cent this year. Most housing market analysts failed to predict last year's boom.
Last month saw the annual rate fall to 11.7 per cent, its lowest since July last year. "With prospects for pay and jobs deteriorating modestly, the housing market will slow during 2002," Mr Bannister said. "However, the market looks set to remain robust, with prices expected to rise by 6 per cent."
He said that with mortgage rates close to a half-century low, homeowners would be able to sustain their current record levels of debt. The Bank of England base rate, currently at 4 per cent, would have to rise to 10 per cent before homeowners found their mortgage payments anywhere near the levels of the late-1980s boom.
But he urged other mortgage lenders not to take advantage of low rates by encouraging borrowers to "overstretch" themselves. "If lenders stoke the market by relaxing credit conditions, then our forecast that house prices will grow by 6 per cent this year may prove to be an under-estimate," he said.
Last month two mortgage lenders, Alliance & Leicester and NatWest Bank, said they were prepared to lend only 90 per cent of a property's value in areas where they believed homeowners could be exposed to negative equity if prices crashed.
But Simon Rubinsohn, an economist at Gerrard, a City stockbroker, said: "The fact that there was no reverse after the strong increase in December is a testament to the underlying strength of the property market at the present time."
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