Rate rise almost certain
Nationwide has warned that an interest rate rise is practically inevitable, considering the ongoing rises in house prices


Although the Bank of England held off implementing any rate rises in April, the acceleration of house prices since that decision was made almost definitely means a rate rise will take place in May, says Nationwide today. It found the pace of house price growth almost doubled between March and April, bringing the annual rate of inflation back into double digits, at 10.2%. However the mortgage lender also points out that the annual change seems more dramatic due to an extremely weak period last year, with the three month rate still cooling: latest figures show prices increased by 2% between February and April, the lowest three monthly growth rate since last August. An interest rate rise seems inevitable now, but in the report Nationwide warns that too sharp a rise could destabilise the market: 'In our view, the talk of rates climbing to 6% and beyond are overblown and if implemented in the current climate could be damaging to housing market stability,' said Fionnuala Earley, Chief Economist. The lender also stressed that, in its opinion, any house price crash predictions are premature. 'An important factor which would suggest house price falls are unlikely in the current economic climate is the state of the general economy. Today it is continuing to grow; the labour market has been remarkably strong and interest rates have increased by only 0.75% in the last two years,' Ms Earley concluded.
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