House prices rise…again

The housing survey found that prices rose by 0.8% during the month, the same as in July, lifting the annual rate of growth to 6.6%.

With the average UK property now costing £167,721, this has been recorded as the fastest yearly growth since April 2005.

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The report is the Nationwide’s first since the Bank of England raised UK interest rates to 4.75% from 4.5% earlier this month.

Fionnuala Earley, Nationwide’s group economist, said: “While the MPC is now clearly in hawkish mode, uncertainties about oil prices and the amount of slack in the economy mean that the inflation outlook is less definite and fewer rate rises are expected.

“Even though we expect rates to increase to 5% – 25 basis points above the peak of the last cycle – current economic conditions, especially in the labour market, are still supportive.”

Despite potential interest rate rises, Nationwide does not expect the market to slow as sharply as during the period November 2003 and August 2004, when five rises led to a rapid fall in house price inflation.

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