Nationwide predicts 6% house price rise

Nationwide predicts 6% house price rise

Britain's biggest building society yesterday predicted that house prices would rise by 5%-6% in 2007. Nationwide also said it expected prices to end this year up 8%. That was an upwards revision of its forecast in August that they would rise 5% this year, which was itself an increase on the previous prediction of 0%-3% annual growth.

The forecast is likely to delight many homeowners worried that with two interest rate rises since August and predictions of another early next year house price growth might come to a halt. But it will not be welcomed by prospective first-time buyers already struggling to buy.

Announcing record results for the six months to September 30, Nationwide's outgoing chief executive, Philip Williamson, said there was still a shortage of properties, and added: "We are still operating in a relatively low interest rate environment. Rates might go up another 25 basis points but that might be the end of the cycle. Five percent might be the top of the cycle."

The society said its net mortgage lending jumped almost 50% to £5.9bn, while gross lending hit £14.5bn, up 34% on the same period last year.

Nationwide said it had achieved "very high levels" of mortgage lending during the period, but this did not mean it was taking more risks. "We are a cautious lender," said Mr Williamson.

The average new mortgage loan as a percentage of the property's value had risen to 59%, up from 55% in April. For the entire mortgage.....continued below

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book the average loan-to-value was 39%. He said mortgage arrears had gone up "fractionally" but Nationwide had about 140 properties in possession out of a total of 1.2 million borrowers.

Mr Williamson waded into the row over First Direct's announcement that it would be levying a £10 monthly fee on its current accounts, but only on customers paying in less than £1,500 a month. He said the move by the bank, the internet arm of HSBC, was "another nail in the coffin for free banking."

Mr Williamson said Nationwide, which has 3.9 million current account customers, three times as many as First Direct, had "no plans right now to introduce any account charge". But he appeared to indicate the society might bring in fees if other competitors were to do so. "We will have to keep an eye on the market," he said.

Nationwide reported a record underlying pre-tax profit of £306m, up from £254.8m a year earlier. The society recently announced it was taking over its smaller rival, the Portman, and said yesterday that "everything is on target".

This was Mr Williamson's last set of results before he hands over the reins to Nationwide's finance director, Graham Beale, at the end of March. "Nationwide, as a thriving mutual business, is in superb shape," he said.

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