Inflation warning over rate cuts

House prices in the UK may fall if inflationary pressures restrict the Bank of England's scope for cutting interest rates, the Royal Institution of Chartered Surveyors (Rics) has said.

Responding to the news that the December Halifax House Price Survey had bucked the trend of the previous three months by showing a 1.3 per cent rise in prices during the month, Rics said the figures were a "surprise".

It added that the early part of 2008 would be "challenging" and although an absolute decline in prices was "unlikely", this would depend on the Bank of England having the scope to cut rates.

The news may add to the uncertainty of those planning to obtain their own home and may make the prospect of self build more attractive.

Among the contrasting views about prices, Halifax said when it released the figures yesterday that the 2008 market would be "flat", while the Motley Fool forecast a 20 per cent drop in prices.


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