The UK housing market is well placed to ride out the sub-prime lending crisis gripping the US, at least for now.
Nationwide building society said the crisis, which has sparked world stock market turmoil, was unlikely to have a big "effect on the rate of growth of house prices in the UK in the short term".
However, it added that the UK market was showing "clear signs" of slowing, as the five rate rises since last August take their toll.
Nationwide's latest monthly survey found that the annual rate of house price inflation dipped slightly from 9.9 to 9.6 per cent between July and August.
Nevertheless, Nationwide added that it expected house prices will have grown by between 5 and 8 per cent on average during the course of 2007.
But the outlook for 2008 is less certain, particularly if the US crisis continues. "A prolonged financial market downturn would be uncomfortable for the overall economy given the importance of this sector to economic growth over several years," said Fionnuala Earley, Nationwide's chief economist.
The effects of any downturn would be felt most keenly in the South-east and could depress house prices, she added.
This possibility makes it less likely that the Bank of England will raise rates when it meets on Thursday.Reuse content