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Nationwide Predictions Alter After Property Inflation Falls

Nationwide Predictions Alter After Property Inflation Falls A leading British building society has said that is being forced to reassess its property price predictions after house price inflation unexpectedly tumbled.

This should help those trying to get out of debt to make their monthly mortgage repayments more easily.

Nationwide said that house prices dropped by 0.6 per cent in March, causing the annual inflation rate to just 1.1 per cent.

Nationwide said that this represented the lowest rate since March 1996 and warned that prices would keep on dropping. Previously, it had predicted that there would be no significant change by the end of 2008.

A survey by Nationwide found that the average price of a house in Britain had now dropped to £179,110. It said that the quarterly shift in prices revealed an overall drop of 1.5 per cent.


Nationwide’s chief economist, Fionnuala Earley, said, "The outlook for UK house prices is clearly more downbeat than at the time of our November forecast.”

"A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward."

However, Ms Earley stressed that property prices are still 11 per cent higher than at this time in 2006, and 47 per cent higher than in 2003.

"Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years," she added.

"But with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away."


Nationwide has recently unveiled an interest rate increase covering all its fixed-rate and tracker mortgages, which account for 90 per cent of all new mortgages in Britain.

The reason for the hike was because it now cost more to borrow cash from other financial lenders, due to the global credit crunch.

The rate of interest of interbank lending has increased by 0.5 per cent since late January.

Remortgage News posted on 04 April 2008

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