House boom still going strong, says Nationwide

The housing market remains buoyant, Nationwide Building Society said yesterday as it published figures showing the average price jumped 1.9 per cent last month. This was the biggest increase since last summer and was almost five times as fast as the 0.4 per cent rise in February.

The message was in sharp contrast to that from the Halifax, the UK's largest mortgage lender, which said on Wednesday that the market was slowing, and to anecdotal evidence that prices are falling.

Alex Bannister, Nationwide's chief economist, said: "Despite what some people say, these numbers do not show that prices are crunching down."

The main factor behind the latest rise was a price surge in the North. The figures show the boom that gripped London and the Home Counties is rippling out into the regions.

According to Nationwide, prices in the North of England were rising at an annual rate of 37 per cent – the fastest since the late 1980s boom – followed by 31 per cent in the East Midlands and compared with 23 per cent in London.

The fastest rise was in Bolsover, Derbyshire, where prices rose more than 40 per cent while in Westminster, central London, they were up by less than 5 per cent.

Nationwide still expects the housing market to slow as the weaker economy and rises in national insurance payments hit both incomes and confidence levels.

But signs of continued strength in the housing market were supported by figures from the Bank of England showing that homeowners borrowed a record of amount of money against the security of their home in the final three months of last year.

Britons withdrew £13.3bn from the value of their homes on top of their existing mortgages between October and December last year. This was equivalent to about £150m a day.

This is to date the largest amount borrowed in this way and as a proportion of householders' disposable income it is the second highest since modern records began in 1970.

The only time consumers saddled themselves with more debt was the autumn of 1988, as the housing market was approaching a peak that ultimately collapsed in a crash, plunging millions of people into negative equity.

The Bank of England is known to be worried about the mountain of debt that households have taken on. The fear is that if there were a sudden economic shock that led to a rise in unemployment, consumers would stop spending – a move that would push the UK into recession.

Mr Bannister said he believed households were still raising money by extending their mortgages. "Absolutely. Given low interest rates and the high cost of moving, many people are choosing to borrow money to improve their home rather than move," he said.

Meanwhile, the Halifax was forced to clarify reports that it was planning to offer loans six times a borrower's annual salary compared with the current norm of between two and three times.

It said in a "purely theoretical" case it would offer that deal to someone who took a particular product, earned £100,00 a year was putting down a 30 per cent deposit, had an unimpeachable lending record and had held several mortgages in the past. "We don't expect to meet such a person," the bank said.