Housing market 'firm' for 2007

The recent double-whammy of interest rate rise will not shock the housing market into decline over the next 12 months, claims a leading mortgage lender.

House prices will rise by between five and eight per cent over the course of 2007 predicts Nationwide, down from average growth this year of around eight to nine per cent.

The boom in recent months, supported by a buoyant economy and shortage in supply will to run into next year claims Fionnuala Earley, Nationwide's group economist.

"We can expect to see a few months of double digit annual house price inflation in the first half of the year," she said.

However, Ms Earley added that this momentum would not be sustained and prices would level off in the second six months of 2007.

"Increasingly poor affordability and likely cutbacks at the Bank of Mum and Dad will cause the rate of house price growth to move back into single digits in the latter part of the year."

London and the south-east are expected to lead the growth, while the markets in the north, Midlands and Wales are likely to be much flatter than this year.