The Nationwide Building Society is expecting a sharp slowdown in the current pace of house price growth. However, it believes the lower priced regions will catch up on the rest of the market. For the coming year it expects prices to rise by 5% in London, 10% in the Midlands and 15% in the North, compared to current annual growth rates of 23%, 30% and 35% respectively.
According to the latest Nationwide Building Society Quarterly Review, house prices rose an average of 3.9% over the last quarter, compared with a rise of 6.7% and 7% in the last two quarters of 2002. The change over the last month was 1.9%, with an average national house price in March at £122,180.
However, lending remains close to levels seen a year ago, with £7.1bn advanced in February, while remortgaging continues to grow. February saw remortgaging of £8.5bn, a 55% increase on the same period a year ago.
Alex Bannister, group economist at Nationwide, commented: ‘Given that an estimated 60% of remortgage lending is used for home improvement, it is likely that some homeowners are deciding to ‘improve’ rather than ‘move’.’
Bannister restated Nationwide’s assessment of a national 10% house price growth this year, down from 25% last year. But he is expecting interest rates to be close to current levels at the end of the year, offsetting a modest growth in private sector pay.
He said: ‘A more sustained and significant fall in confidence would have to occur before there was any suggestion that expectations would reduce house price growth. Given that we foresee only a modest deterioration in the prospects for income, employment and interest rates we do not think this likely.’