Biggest jump in house prices since 1997
Wednesday 31 March 1999
"House price inflation could be heading back towards double figures," said Jonathan Loynes, an economist at HSBC Markets.
Nationwide, which publishes one of two monthly house price indices, said prices jumped by 1.5 per cent in March, taking the year-on-year increase to 7.6 per cent. This followed a subdued February, when prices rose by just 0.1 per cent.
Halifax said its March index, published next week, is likely to show a slight increase. Its price figures have been well below Nationwide's for the past two years, and showed a 0.5 per cent drop in February.
David Parry, Nationwide's head of planning, said: "Although spring usually produces an upturn in the housing market, there are tentative signs the recent series of interest-rate cuts have helped boost confidence."
The Easter weekend is a crucial time for the housing market, traditionally bringing a big upturn in sales.
Other indicators have pointed to a revival in the market. Surveys of estate agents and figures on mortgage approvals have both indicated the start of a recovery. In addition, underlying conditions are favourable; mortgage rates are at their lowest for more than 30 years, and properties are affordable by past standards.
However, this month's Budget dealt a blow by abolishing mortgage tax relief from April 2000.It also raised stamp duty on properties priced at above pounds 250,000, which will dampen the top end of the market.
But the biggest question mark over the outlook for house prices remains the length and severity of the economic downturn. "We have had the interest- rate cuts, but nobody has felt the pinch of rising unemployment yet," said Mr Loynes.
Although most forecasters reckon the slowdown will be moderate, few are as optimistic as the Treasury, which is predicting 1 per cent growth this year. Unemployment rose slightly last month, according to the latest official figures.
Even so, the Bank of England is expected to cut rates further. The Monetary Policy Committee could act as soon as next week, according to some analysts.
The average UK house price stands at pounds 68,308 on Nationwide's figures, up from pounds 63,493 a year ago.
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