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U.K. house prices set to rise by 5% in 2010

publication date: May 12, 2010
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House prices in the UK will rise as low borrowing costs and the shortage of homes support the property market, the Centre for Economics and Business Research said. Home values will rise 5 per cent and mortgage costs will fall as the Bank of England base rate remains at 0.5 percent. The CEBR cut its forecast for price increases this year from 6 per cent after the tax on home purchases rose and cold weather damped demand for property.

Prime Minister Gordon Brown says he wants to keep interest rates “low” for homeowners and homebuyers as he debated on television with the David Cameron and Nick Clegg.

LetMC software - click to learn more“The factors driving up house prices are low mortgage rates, keeping housing affordability in as favourable a position as at any time since 2004, and a very low rate of housebuilding,” the CEBR said, adding that average mortgage interest rates will drop by about 1 percentage point to 3 percent by the start of 2011, the group said.

The Bank of England’s first increase in its interest rate “could be as much as two years away and possibly more so,” Douglas McWilliams, chief executive of the CEBR, said in the statement.

“When the market realizes, the spreads on new mortgage rates will fall.”