A leading bank is forecasting that if interest rates do not rise next year - as some experts predict - then there will be massive house price increases.
These would be 6.7 per cent on average in 2016 and an eye-watering 11.5 per cent the following year.
BNP Paribas Real Estate says that if there is no rate rise until late 2017 then the average UK home would cost £235,500 by that time, after two high annual price rises. It also warns there would be a boom in credit and sharp rises in GDP and inflation, increasing pressure on the Bank of England to restrict mortgage finance.
However, if there is an interest rate rise next year then average house price growth would be slower, at 4.4 per cent in 2016 and 6.9 per cent the year after, to end 2017 at £220,116.
Over the longer term the average UK house prices to rise 27 per cent to £250,000 by 2020 with the strongest growth seen in south west England - up a resounding 40.2 per cent in that period - and in parts of the south east, up 36.1 per cent.
The bank also says that stamp duty announcements made in George Osborne’s Autumn Statement would reduce average house price growth in London from its current 5.6 per cent to 4.7 per cent in 2016
“While on the face it a deferral would be good news for home owners, we believe this scenario is a cautionary tale for the UK economy as a whole. There is already concern at the Bank of England over the pace of house price growth and while the current lack of housing supply is a significant driver, the sustained low cost of finance is also a major contributor” says Adrian Owen, Head of Residential at BNP Paribas Real Estate.
“The disparity in prices across the regions of the UK continues to grow, with the North East, Scotland, Wales and Northern Ireland showing less ongoing demand. However, we expect the Midlands and the non-London south to play a degree of catch-up with London where, following its outperformance for so many years, prices are forecast to grow slightly below the national average” he says.