House price growth is beginning to cool despite the annual rate of inflation breaking the 10% barrier, says Nationwide.
The building society’s figures suggest prices rose 0.9% this month, pushing the annual rate of price inflation to 10.2% and taking the average price of a home in the UK to £180,314.
But the company says, over the long term, this trend is beginning to tail off.
Prices increased by 2% between February and April - the lowest three-monthly growth rate since last August.
Fionnuala Earley, chief economist at Nationwide, says: “While the monthly rise in prices is stronger than the [Bank of England] would have liked to see, it can take some comfort from the fact that the underlying trend is softening.”
As predicted, this latest increase in house prices is likely to increase the pressure on the Bank to raise interest rates, which are widely expected to go up by 0.25% to 5.5% in May.
But Nationwide has cautioned against the Bank pushing rates up to 6% and beyond, claiming such a move could knock the property market off balance.
Earley says: “Too sharp a rate hike could undermine market confidence and dry demand up swiftly.”
She explains previous price increases had been supported by resilient demand, but signs are emerging this is beginning to wane.
First time buyer numbers fell by 3,200 between December and February, compared with the same period last year, Nationwide says.
It also argues warnings of a crash in the property market are premature.
It says interest rates would have to rise by anther 2% before affordability for buyers became as stretched as it was before the property crash of the late 1980s, and is made more unlikely by the healthy state of the economy.
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