B&B warns that house prices may start to fall

Bradford & Bingley, the UK's biggest buy-to-let lender, has warned that certain parts of the UK may see falls in house prices over the coming months.

Speaking at the company's interim results yesterday, Steven Cranshaw, the group's chief executive, said he anticipated certain "micro-markets", such as terraced streets in Fulham that had seen houses sold for more than £1m, would see falls in prices, rather than a slowdown in growth. However, he reiterated that across the country, house prices would continue to grow, albeit at a slower rate.

Mr Cranshaw moved to dismiss suggestions that the buy-to-let sector was overheating, arguing that the market remains buoyant. As a result, he said the company expected to continue to perform well in the second half. "Mortgage lending fundamentals are strong and stable, interest rates should remain at historically low levels, employment remains high, economic growth is steady and affordability metrics should remain relatively good," he said.

"Given this stability, we find the prospect of a severe downturn in the housing or mortgage markets extremely unlikely."

Mr Cranshaw added that he believed the current interest rate cycle could reach its peak within the next six months.

Last week, Nationwide said house price growth had once again returned to bumper levels in July, with its UK index up by 2.1 per cent for the month - its highest rise since February. Year on year, house prices are now up more than 20 per cent, casting doubt on recent predictions that inflation in the market is starting to slow as a result of rising interest rates.

Mr Cranshaw also said that the group increased its pre-tax profits by 5 per cent to £140m, coming in at the top end of analysts' expectations.