Halifax raises house price inflation forecast

Halifax, the UK’s biggest mortgage lender, has raised its house price inflation forecast for the year, after house prices rose faster than expected in the first six months of 2007.

Despite the rise in interest rates, the UK’s biggest mortgage lender now expects house price inflation during 2007 to be 6% rather than 4%, as forecast earlier in the year.

Halifax attributes the 2% increase to a stronger than expected economy and a shortage of new homes.

During the first-half of the year house price inflation was strong but the recent increases in mortgage interest rates is having its effect on housing affordability and growth is expected to slow over the second-half.

The Nationwide Building Society has confidence in its original forecast of between 5% and 8% growth for this year and both Nationwide and Halifax expect the rate of house price growth to fall from the current 11% to between 5% and 8%, during the remainder of 2007.

Meanwhile, the Council of Mortgage Lenders predicts that mortgage lending will remain strong in the coming months.

However, it expects a decrease in the number of borrowers moving house and an increase in those re-mortgaging because their fixed-rate loans have come to the end of their terms.

Some borrowers will also be swapping to a fix-rate product to protect themselves against further interest rate rises.

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