Nationwide figures spark fear interest rates may rise higher next week

A surprise 1.1% jump in house prices during June has fuelled speculation that interest rates will rise again next week.

Figures released by Nationwide put the annual pace of increase at 11.1%, or more than £50 a day. The average house price is now £184,070, more than £18,000 higher than this time a year ago.

House prices rise

Nationwide chief economist Fionnuala Earley said the building society had expected interest rates to rise in August, but that the unexpectedly strong June might bring the rise forward.

She said: “While we expected interest rates to increase to 5.75% in August, this news will set the stage for that rate rise to move forward to July and for the risk of a rise to 6% to increase significantly.”

The Monetary Policy Committee voted 5-4 in favour of a steady rate of 5.5% this month. They meet to decide July’s rate next week. Bank of England deputy governor John Gieve has already hinted he will vote for a base rate rise.

In spite of the June bump in prices, Nationwide remained sanguine about the general rate of house price growth. It predicted falling house purchase approvals and fewer new buyers will see UK house prices rise by only 5 to 8% this year.