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Rising pay, low rates to boost house prices

The UK housing market continues to defy the global downturn, with prices set to rise by 6 per cent by the end of the year, according to figures from Nationwide.

Its monthly survey shows that house prices rose by 0.2 per cent in January to £93,231 from £93,045 on a seasonally adjusted basis, with the number of house sales up by 12 per cent in the year to December.

Nationwide attributes the continued strength of the housing market to take-home pay rising at its fastest level since the 1980s and mortgage rates being at their lowest for 40 years.

The society says remortgaging has also played a significant part in sustaining the market, as increasing numbers of borrowers switch lenders to secure cheaper deals.

The number of people remortgaging increased by 40 per cent last year to a record

800,000, up from 571,000 in 2000.

However, Nationwide warns that the market will slow slig-htly later this year as house prices are hit by rising interest rates and falling employment. Annual house price inflation slipped back last month to 11.7 per cent from 13.8 per cent although the society believes this simply reflects the abnormal strength of the market last year.

Group economist Alex Bannister says: “Despite pessimistic news from the global economy and the UK manufacturing sector, the housing market is holding up well. The reasons are straightforward, with strong real take-home pay and low mortgage rates offsetting fears over increased job uncertainty.”

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