Lenders increase forecasts as house prices rise

Halifax Building Society is set to more than double its own forecast for house price rises for the remainder of this year, from 2 per cent up to 5 per cent.

The society is due today to announce that its house price index rose by up to 1 per cent in April, marking the ninth-consecutive monthly increase. Fresh signs of a gradual recovery in the UK property market were underpinned yesterday by Nationwide Building Society, which said its own house price index improved by 1.2 per cent last month.

The increase takes house prices to an 18-month high after the collapse faced by the market for most of last year. Over a 12-month period, prices were 1.2 per cent higher.

Philip Williamson, corporate development director at Nationwide, said yesterday: "This month's rise represents a continuation of the positive trend that began last summer.

"Estate agents' reports show increased interest from buyers in most areas of the country, although a shortage of good quality property is holding back a potential increase in activity. Prices reflect stronger demand for those desirable properties that do come onto the market."

Mr Williamson added that subdued levels of sales were still evident from statistics issued last week by the Inland Revenue, which showed that the number of transactions in March were pinned at about 90,000, similar to previous months.

He added: "More timely data such as new mortgage approvals are showing a slightly stronger increase in activity but, never the less, gains remain modest."

Ian Shepherdson, UK economist at HSBC, admitted yesterday that although new mortgage approvals had reversed the catastrophic falls last year, there had been little real progress.

He claimed the March figures may have been influenced by the increase in fixed rates.

"The slowdown in mortgage demand means the recent strength in house prices almost certainly cannot last," he added.