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Thursday, 4 April, 2002, 13:29 GMT 14:29 UK
House prices still booming
Houses graphic
Interest rate changes may affect demand
The UK's biggest building society has backed findings that house prices are continuing to soar.

Prices rose 1% last month, taking them 14% higher than they were in March last year, the Nationwide building society said.

Compared to the 1980s affordability remains good

Alex Bannister. Nationwide
The report comes a day after the Halifax, the UK's leading mortgage lender, reported year-on-year house price inflation of 16.0%.

But Nationwide economists also echoed Halifax forecasts that the rate of price increases would begin to slow, with affordability problems acting as a brake on the market.

Rate rise ahead

Currently, buyers are still finding house prices within their reach, said Alex Bannister, Nationwide's group economist.

"Compared to the 1980s it (affordability) remains good," Mr Bannister said.

"This is because despite the price of an average house in real terms being slightly higher than at that 1980s peak, earnings are 25% higher."

While first-time buyers were finding it difficult to get on the property ladder, they were still keen to become homeowners, and there had been a 50% rise in the number of people hoping to make their first home purchase.

Although interest rates were poised to rise, they would have to increase by four percentage points to see mortgage payments, relative to salaries, return to 1980s levels.

The Nationwide said it expected the benchmark rate to end the year half a percentage point higher at 4.5%.

Regional trends

Price growth was, for the third successive quarter, highest in East Anglia, where the price of the average home was 18% more expensive than a year before.

House prices in London rose 16% during the first three months of this year, with Newham seeing the biggest increase, up 32% year-on-year.

However, in Northern Ireland the yearly increase was just 4.5%, while in Scotland prices have risen by 8.5% during the past 12 months, despite the area experiencing its fastest period of growth for four years.

In Wales, prices increased by 10.5% during the year to the end of March.

The BBC's Rory Cellan Jones
"It is still easier to afford a home than it was in the late eighties"
See also:

04 Apr 02 | Business
Rate rise fears as Bank meets
03 Apr 02 | Business
UK house prices surge
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