Bradford & Bingley optimistic on property

Mortgage specialist Bradford & Bingley today predicted the housing market would continue to soften as a series of interest rate hikes take their toll, but prices would rise next year.

The company said house prices would rise by about 2% next year - in contrast with some warnings from rival lenders and analysts of a substantial fall.

It came as the group estimated profits for its current financial year would be at the top end of analysts' expectations. The group forecast that the housing market would move into a period of consolidation, which it welcomed.

Mortgage affordability remained good and it did not expect to see any "material decline" in arrears in the near-term.

It said in a trading statement: "We believe that the housing market will move into a period of consolidation with reduced house price inflation and transaction volumes. We currently forecast house price inflation will be around 2% in 2005."

The forecast was in line with yesterday's statement by Nationwide building society, which also predicted a 2% rise. But it is far more optimistic than other surveys that have warned of a sharp fall. Banking giant Barclays recently warned householders to expect an 8% drop in property prices next year, while Deutsche Bank said they could decline by as much as 20%.

B&B also said today that new mortgage lending had slowed in line with the market cooling in the third quarter of its financial year.

It said its lending business had continued to show good growth and arrears levels remained extremely low..