House prices in Britain jumped at their fastest rate in three months in August, the Nationwide building society said today.
The mortgage lender said that house prices rose by 1.1 percent in August after increasing by 1 per cent in July, though this still pulled the annual rate of increase down to 16.6 per cent from 17.9 per cent.
Nationwide said the current strength of the market, buoyed by the Bank of England's interest rate cut in July, was set to continue in coming months and that it was lifting its forecast for 2003 house price growth to 13 from 10 per cent.
Low interest rates have fuelled a housing boom in recent years which has in turn financed a consumer spending spree that has helped power the economy through the global slowdown as households have borrowed freely against the rising value of their homes.
But many economists are worried that house prices could drop suddenly, severely damaging consumer confidence and spending with it, depriving the economy of its only prop and leaving households saddled with record levels of debt.
Bank of England Monetary Policy Committee member Mr Paul Tucker said yesterday the risks of a house price crash had receded but warned consumers that interest rates wouldn't stay low forever and so they should budget for that when making borrowing decisions.