Rise in house prices may slow

The upward surge in the property market showed no sign of abating yesterday as Nationwide Building Society released figures showing that house prices rose by 1.4 per cent in September.

The society's monthly index also indicated that over the past 12 months prices had risen by 6.7 per cent, well ahead of original expectations and the largest year-on-year rise since 1989, when the market collapsed.

Average property prices across the UK, at pounds 54,334, are at their highest since August 1991. Nationwide's report is expected to be similar to a survey by Halifax Building Society, which is out today. This is likely to show a buoyant market, although prices may not rise by the same amount.

Philip Williamson, Nationwide's corporate development director, said he did not believe the rapid growth was likely to survive much longer.

"The apparent strength of house prices in recent months continues to reflect distortions caused by shortages of quality properties in certain sectors of the market," he said. "[These] are giving a short-term boost to prices while severely limiting sales."

He said, however, that while house prices had risen sharply, this was not a "damaging boom".

Separately, a survey by Equifax, the consumer credit information service, yesterday showed that UK consumers paid off their finance deals faster in the past three months than a year ago. The Equifax figures reflected suggestions from many building societies that borrowers were using low- interest rates to pay off their home loans at a faster rate.

Nationwide's report suggested that property transactions had risen in recent months, while buyers had found more properties on the market to match their surge in demand.

In turn this had relieved pressure on prices, Mr Williamson said: "The exceptional rate of growth seen in recent prices is unlikely to be sustained.

"Poor-quality properties are still struggling to find a buyer. Although confidence is much improved, the debt overhang of the early 1990s may continue to dampen existing homeowners' aspirations."

Backing for this view came from FirstMortgage, a telephone lender, whose survey of borrowers showed that more than 70 per cent did not believe prices would rise beyond 3 per cent, barely above inflation, in the next 12 months.