House prices rise ?50 a day

New figures showing a surge in mortgage lending and another strong rise in house prices yesterday provided further evidence of continued buoyancy in the property market, confounding those who declared it was coming off the boil.

Gross mortgage lending by British banks hit £6.5bn in March, 30% up on February and the highest figure since late last autumn, said the British Bankers' Association.

The cost of the average home rose by £1,500 last month - £50 a day - to reach £80,893, according to the latest data from the Nationwide building society.

Some observers said that be neath these headline figures could be detected signs that the housing market might be starting to slow. While clearly a substantial rise, the March surge in mortgage lending was not as strong as that notched up during the corresponding period in 1999, when the increase was 38%. Last month's 1.6% increase in house prices was down slightly on February and March, when the figures were 2.2% and 2.3% respectively.

The BBA said the number of new mortgage loans approved climbed to 149,779 in March from 123,955 in February. This figure included 75,772 loans for house purchase - almost double the 39,062 achieved in January this year, and sug gesting that the spring house-buying season got off to a strong start. Remortgages and loans for home improvements and equity release made up the rest of the total.

The new mortgage figures may strengthen the argument for an increase in interest rates when the Bank of England monetary policy committee meets this week.

Nationwide said last month's 1.6% rise in house prices means the average home is now worth 17.5% more than a year ago. This annual inflation figure has risen sharply in recent months - 12 months ago the figure was 7.1%, while in December it was 13.3%. A year ago the average home cost £68,856.

The society said the market's strong run was likely to continue for another few months, fuelled by the expected con tinued strength of the economy.

"However, by late summer, as some of the momentum in the south-east reduces, price rises are unlikely to stay at current levels," said spokesman David Parry. "We would therefore expect to see a gradual slowdown in house price inflation to around 14% by the end of the year."

The current double-digit rates of price inflation are simply not sustainable given earnings growth of around 6% and general price inflation of 2.5%, according to the Nationwide.

After concern from some quarters that some lenders have been offering homebuyers too much money, the society called on homebuyers to take a "relatively cautious view" in their borrowing and said that lenders should continue to take a prudent approach and must make sure borrowers did not overstretch themselves.

The Nationwide figures came 48 hours ahead of house price data from the Halifax, which has lately been taking a much less bullish view of the market than its rival. According to the Halifax, house prices fell 0.9% in February and 0.4% in March.

The Nationwide signalled that even if the monetary policy committee did raise interest rates this week, this would do little to take the heat out of the market, and said that there is little to prevent continued house price rises.