Market Shows No Sign of Softening

House prices have risen by 4% since August ? nearly £4,500 on an average property - according to Nationwide's most recent housing market survey. Despite the interest rate increase at the beginning of the month, prices continued to rise by 1.4% in November ? a stark contrast to November 2005 when there was a marked price drop. If prices rise a further 1% in December, annual inflation will measure 10%. 'Barring a drastic slow down in market momentum in December, house prices look set to post something like a double-digit gain in 2006,' said Kelvin Davidson from Capital Economics. Property experts are not forecasting a dramatic slowdown. In fact mortgage demand is pointing to continued price acceleration over the coming months. 'What's more, new buyer enquiries remain solid, suggesting there also remains some strength in the pipeline for mortgage approvals,' said Mr Davidson. Apparently the prolonged price boom will probably lead to another rise in interest rates in the New Year: 'Admittedly, given today's data, November's rate rise does not seem to have had much impact on the market. But given the normal lags in the house buying process, we would not expect any impact from higher rates to show up in the data until next year,' he said. Thus property experts are anticipating a cooler housing market next year, and Nationwide believes there is now a lower likelihood of further interest rate rises in the near future: 'While a rate rise cannot be ruled out, it seems less likely than it did a few weeks ago and we maintain our view that interest rates are likely to have peaked at 5%,' explained Fionnuala Earley, Nationwide's Group Economist. Since house prices are growing at their fastest rate since February 2005, the lender is confident that the market will remain strong in the coming months. 'With interest rates likely to have peaked at 5% and the economy growing at a stable rate there is no obvious trigger that would lead to a sudden loss of confidence,' said Ms Earley.