Societies say higher rate may depress house prices

THE Building Societies' Association warned yesterday that last week's rise in base rates could well depress the 'still very fragile' housing market, as it published figures showing new mortgage commitments stronger than expected last month at pounds 3bn, writes Robert Chote.

Meanwhile, the Royal Institute of Chartered Surveyors predicted that a pick-up in autumn house sales was unlikely to be strong enough to push prices higher.

The housing market figures were accompanied by mixed signals from a host of banking and monetary statistics. Lending by banks and building societies to the private sector rose by pounds 1.9bn in August, compared to a pounds 2.4bn increase in July, according to figures from the Bank of England. Andrew Cates, of UBS, said companies were increasingly raising money from the bond and equity markets, rather than borrowing from banks.

The British Bankers' Association's measure of lending by the big banks picked up a little to pounds 1.6bn in August. The director- general of the BBA, Lord Inchyra, said: 'This rise was before the recent increase in interest rates, and higher borrowing costs may well slow the rate of lending . . . the combination of a further increase in consumer credit, and a substantial fall in personal deposits, suggest that consumers may now be feeling the effects of higher taxation.'