The housing boom is "unsustainable", one of Britain's biggest mortgage lenders warned yesterday as new figures showed prices rising at almost 18 per cent a year.
The Nationwide building society said the price of the average home was £80,893 in April, 17.5 per cent higher than a year ago and a 1.6 per cent rise in the month. This is the steepest annual rise since the spring of 1989 - close to the peak of the boom. The average price for a home has soared from £68,856 in April 1999 - a rise of £12,037 or £32 a day.
David Parry, Nationwide's divisional planning director, said: "Double digit rates of house price inflation are not sustainable given earnings growth of around 6 per cent and general inflation of around 2.5 per cent. This suggests that homebuyers should take a relatively cautious view." Yesterday's figures will add to calls on the Bank of England to raise interest rates again to dampen down an inflationary boom in the domestic economy. Its Monetary Policy Committee reveals its decision tomorrow.
But Mr Parry said another small rise in mortgage costs would have no more than a "marginal dampening effect" on the market. He warned that the main risk of a sharp slowdown in house prices would come from a sudden end to the economic boom. "A significant increase in unemployment or a serious stock market correction would both dampen demand for housing," he said.
The housing market has been underpinned by the buoyant jobs market, with unemployment at a 20-year low.Reuse content