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Homebuyers are &#39better insulated&#39 against slump

Nationwide says borrowers are better protected from a slump in house prices than in the past by having put down bigger deposits.

But it warns lenders to stay cautious and test borrowers&#39 ability to meet repayments.

The society says house prices increased by 1.7 per cent last month and 26.5 per cent over the last year. The average price of a property is now £117,905.

It predicts that house price inflation will be considerably lower over the next year.

Nationwide estimates fewer than 125,000 buyers had a deposit of 5 per cent or less last year. It compares this with 1989 when 300,000 buyers had a deposit of 5 per cent or less and half of these had no deposit at all.

The society says war with Iraq will affect consumer confidence but it believes that only a rise in interest rates or unemployment will threaten the climate of the housing market.

Chief economist Alex Bannister says: “While our outlook for the housing market remains positive, we believe households are more insulated from the effects of falling house prices than in the past. The main reason for this is the trend towards buyers putting down larger deposits.

“Prudent lenders should ensure that they stress-test their borrowers&#39 ability to meet repayments should circumstances change.”

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