House price inflation 'to slow this year

House price inflation will slow this year because of rising interest rates, the Nationwide building society predicted today.

Britain's biggest customer-owned lender said it expected the increase in house prices to fall back to 15% this year as rising interest rates cool the market.

"Annual house price inflation is currently at around 19% but our forecast for the year is for around 15%. The increase in interest rates will gradually provide a ratcheting effect which will bring down the rate of price increases," Nationwide's commercial and treasury director, Stuart Bernau, told Reuters.

Earlier, Nationwide reported a 21% increase in pre-tax profit to ?426.8m for the year to April 4, on the back of booming mortgage sales. The company has benefited from historically low interest rates that have fuelled a housing market boom.

"About half the market is remortgages and there is still an enormous opportunity for us to benefit from this sector. As rates increase, people like us who offer cheaper deals will see customers switching over to them," Mr Bernau said.

Nationwide expects continued growth despite the Bank of England's recent rate increases and the expectation of more to come. Earlier this month, the Bank voted unanimously to raise interest rates by a quarter-point to 4.25%, but members of the Bank's monetary policy committee also discussed putting up rates by 50 basis points.

Net mortgage advances for Nationwide were ?13.2bn, compared with the ?7.3bn achieved in the last financial year. Gross mortgage lending was 40% up at ?24.4bn compared to ?17.4bn last year.

During the year, Nationwide secured a 12.8% share of the net mortgage market and a 10% share of remortgages, a market it only entered in 2001. Nationwide is now the UK's fourth largest mortgage lender, having overtaken Barclays Bank.