The UKÂ's largest building society has sharply revised up its forecast for house price growth this year, after reporting another robust rise in prices in March.
Nationwide said on Thursday prices rose by 0.9 per cent on the month and 13.8 per cent on the year. It revised up its forecast for growth over the year as a whole to 10 per cent from 6 per cent, citing 'very healthy economic conditions'.
NationwideÂ's regional analysis for the first three months of the year showed that the house price boom was continuing to spread from London and the south-east, where it began. For the third straight quarter, East Anglia came top with an 18 per cent annual rise. The south-west also performed well, with a 17.5 per cent rise. Price growth in London picked up to 16 per cent from 14.3 per cent in the previous quarter. Scotland saw the fastest growth in four years, with an 8.5 per cent annual rise.
The building society said first-time buyers, undeterred by the price of property, were still helping to fuel growth. The number of first-time buyers was up 50 per cent in the year to January.
Nationwide said: 'The economic backdrop remains favourable for the housing market. Unemployment is currently at a 35-year low, interest rates are at a 40-year low and consumer confidence remains high.'
Interest rates are expected to rise, perhaps as early as next month. But Nationwide said rates would have to rise by 4 percentage points - far more than markets are expecting - to push mortgage servicing costs to the peak of the late 1980s as a proportion of income.
Nationwide forecast that the rise in house prices will eventually slow itself because of problems of affordability, 'pricing first-time buyers and key workers out of the market in certain areas'. But it added: 'This is a slow process and we do not envisage a return to the sudden bust scenario seen in the early 1990s.'
(source: Financial Times)