View more on these topics

Nationwide warns of price stagnation

Nationwide is warning that there is growing potential for a drawn-out period of low activity and low price growth in the housing market.

Its monthly house price index shows that prices rose by 1.9 per cent in May. The annual rise is 19.5 per cent.

However, its forecast for the 12 months to December 2004 remains at 15 per cent, implying an average monthly rise of just 0.7 per cent for the remainder of the year.

Group economist Alex Bannister expects a combination of muted after-tax earnings&#39 growth, further interest rate rises and a downgrading of homeowners&#39 price growth expectations to slow the market.

He suggests that with many potential first-time buyers unable to enter the market and debt burdens preventing homeowners from moving up the ladder, there is potential for a period of low activity and low price growth.

Bannister says a more hawkish tone from the Bank of England&#39s monetary policy committee on the pace of consumer spending, borrowing and the housing market have driven interest rate expectations higher.

Although the market is pricing in short rates of 5.3 per cent by the end of the year, Nationwide expects a year-end base rate of 4.75 per cent to be sufficient to meet the inflation target.

Bannister says demand for property remains high, with the decline in first-time buyers being offset by the rise in buy to let. He says: “In the absence of a recession and large increases in unemployment, significant downward pressure on prices would be unlikely.”

Recommended

ABI agreement over GP payments

The ABI has reached an agreement with the BMA on the level of payments to GPs who complete medical reports for insurance purposes. From July 1, the fee for completion of a report will rise to £65 from £60. The fee for a supplementary report will rise to £16.50 from £15.75 and a medical examination […]

Skipton launches new mortgage range

Skipton Building Society has launched a new range of mortgages which includes a flexible three year fixed rate mortgage at 5.69 per cent, a flexible three year capped rate mortgage at an initial rate of 4.99 per cent (capped at 5.75%) and a flexible base rate tracker at an initial rate of 4.50 per cent. […]

Winterthur Life – Winterthur Elite European Equity

Type: Unit-linked multi-manager fund Aim: Growth by investing in European equity funds excluding the UK Minimum investment: Subject to the minimum for Winterthur&#39s bond and pension products Investment split: 30% BGI European equity Index/Gartmore Europe Index (Life), 20% Fidelity European, 20% Gartmore European Selected Opportunities, 15% Cazenove European, 15% JOCHM Continental European Charges: Initial £135, […]

Tenet tells members it is ready for flotation

After two years of preparation, IFA group Tenet is telling its members that the company is in a strong position to go for a market listing. Chief executive Simon Hudson has contacted members of the 2,500-strong IFA group to tell them that the company has met its targets for listing and it expects to report […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment