Don't panic says Bradford & Bingley, house prices won't crash

Mortgage specialist Bradford & Bingley today said it was confident the housing market will survive the fifth interest rate rise in less than a year.

The lenders, who specialise in buy-to-let mortgages, forecast that house prices would start to slow over the remainder of the year but added there was no cause to panic.

The group's comments - following another hike in the Bank of England base rate to 4.75% yesterday - came as it posted a 5% rise in half-year profits to ?140m and said it had a business with "strong prospects".

It told investors: "We continue to believe that the fundamentals necessary for a sudden correction are not evident and that a gradual slowdown is the most likely outcome."

Many analysts are expecting the Bank's monetary policy committee (MPC) to continue its softly, softly approach, adding a couple more quarter-point increases over the coming months.
However, Steven Andrew, chief economist at Isis, said that yesterday's quarter per cent rise marked "the peak of the rate cycle".
"We have held the view for sometime that this widely anticipated rise would constitute the summit," Mr Andrew said. "From here we expect to see rates stay flat for the rest of 2004."
He added that yesterday's statement by the Bank of England had pointed out that the housing market was showing signs of a slow down, and that "the public appetite for taking on more debt is at last waning."
Like Bradford & Bingley, Mr Andrew is expecting interest rates to have further impact on the property market, "with the most likely result being a soft landing rather than the crash some have predicted".

But property website Assertahome.com said that rate rises were already "squeezing the life out of the housing market". Jim Buckle, the group's managing director, said: "The MPC has been explicitly targeting house prices this year and has already hit the bullseye."

He added: "Our research has tracked dramatic declines in confidence among house hunters in recent months and many regions expect house prices to fall in the next twelve months."

The group's research in June showed that 62% of house hunters thought property prices would rise over the next 12 months, compared with 79% in May. A report to be published on Monday is expected to show a further decline in consumers' confidence in the housing market.