Money News

House prices will show 10% annual increase, expert predicts

Friday, 29 January 2010 Writes Seamour Rathore seamour.rathore@consumerchoices.co.uk

Add a comment

Send to a friend

House prices will record a 10% annual rise by February, according to the Nationwide Building Society’s chief economist.

House prices were up 1.2% in the last month, and should show a 10% annual increase by February, according to the Nationwide, the UK’s biggest building society.

Pay freezes could limit further rises in property prices

Marin Gahbauer, Nationwide’s chief economist, said: “Unless there is a fall in property values in February, annual house price inflation is likely to move into double-digit territory next month for the first time since May 2007.”

The annual rise in house prices in January was 8.6%.

While house price inflation marches on, wage inflation is near zero as many businesses are freezing or reducing pay. This could effectively limit further rises in UK property prices.

Nationwide’s Gahbauer also pointed out that as 2009 inflation is much higher than had been predicted, a rise in interest rates this year cannot be ruled out.

“Higher interest rates may be required sooner than is widely assumed,” he added.

Rising interest rates would mean higher mortgage rates for the 56% of mortgage holders who are on variable rate mortgages such as trackers, and standard variable rates (SVRs).

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “Those on variable rate mortgages should take a moment to consider their finances.

“How would a future rise in interest rates impact your monthly household budget? And have house prices recovered sufficiently now to make remortgaging, perhaps to a fixed-rate mortgage product more attractive?

“These are important questions, and you should take advice from an independent mortgage adviser, if you want to discuss your particular situation,” he added.