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LONDON-House prices will rise by 11% this year with central London homes increasing by as much as 15, according to one of the country’s biggest lending institutions. Nationwide Building Society was forced to revise its estimates after figures for August were up a staggering 11.9% on the same month last year. Nationwide had expected an increase of no more than 7%.

Nationwide announced earlier this year that it considered such leaps in property prices ‘unsustainable’ and repeated the warning yesterday. A spokesman said, ‘Prices in London and the commuter belt are still rising more quickly than is sustainable over the medium term.’

Many analysts were anticipating a tailing off in price rises this year after what had been seen as the highest jumps in property values in 2000, increases that have been unprecedented since the late 1980s when the housing market spiralled swiftly from boom to bust. However, the market has continued to boom in all parts of the country due to the lowest mortgage rates in 40 years, strong growth in earnings and falls in unemployment.

Nationwide chief economist, Alex Bannister, says that mortgage payments accounted for just 25% of take-home pay in central London despite the levels of income needed to buy a house running at an all time high.

Bannister added that the factors necessary to put a brake on the current price surge were global slowdown and potential rises in unemployment. When these, coupled with the present low inflationary environment, percolated into the marketplace, growth should be slowed to around 5% over the next few years.

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