New house price fears as Nationwide predicts slowdown

House price statistics to be published this week from a leading mortgage lender are expected to confirm that the market has started to cool.

Nationwide building society's latest monthly house price index, for June, will be published on Tuesday. These will be the first statistics for price trends in a period in which there has been intense speculation about prices, and warnings from the governor of the Bank of England, Mervyn King, about the possibility of a slowdown.

Monthly house price inflation has run recently at about 2 per cent a month, says Nationwide, but Alex Bannister, its chief economist, said: 'My expectation is that we will get numbers in the next few months between 0.5 and 1 per cent. We are pretty close to that turnaround in the market.' But he did not rule out the possibility Nationwide would have to upgrade its forecast for national average price growth this year because the market outside south east England is still strong.

At present Nationwide forecasts that prices will rise by an average of 15 per cent this year. Halifax, Britain's largest mortgage lender, last week doubled its forecast from 8 to 16 per cent. The bank also warned that its share of new lending would fall below 20 per cent for the first time in four years because it was tightening its loan criteria. Halifax's June price index will be published later in the week. Martin Ellis, chief economist at Halifax, said there were signs mortgage demand was weakening.

Much of the house price inflation that has driven the indices to record double-digit percentage rises over the past months has come from activity outside the south east.

Statistics show that prices in the south east have marked time over the past two years. Bannister agreed this could indicate that the market in the rest of the UK would have a soft landing.