House price inflation ''soared'' in 2006

House price inflation has soared to double digits for the first time in two years, according to the latest report from mortgage lender Nationwide.

This means 2007 will begin with high market prices after a surge of around 1.2 per cent in December nudged the annual increase to 10.5 per cent for 2006.

Fionnula Earley, Nationwide''s chief economist, explained: "Both housing market and weather forecasters were surprised by the warm climate this year.

"The temperate weather is likely to have played only a minor role, but the housing market clearly warmed up during the year."

She added that house prices increased three and a half times faster than last year, with analysts putting much of the rise down to low interest rates, growing employment and a lack of housing supply in the UK.

And it doesn''t look likely to stop in 2007, according to the mortgage lender. Nationwide predicts that the trend will continue for the first half of 2007, although the rate of increase is expected to tail off towards the latter part of the year.

Meanwhile, mortgage approvals hit a five-month high during last month as homebuyers continued to fuel the market. The British Bankers'' Association has reported that approvals for house purchases in November shot up to 77,788 compared to just 74,977 in October.


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