House prices 'to rise by 5%'

HOUSE prices will rise by 5 per cent this year despite their sluggish start to the year, it was being predicted today.

The centre for economics and business research said a combination of low mortgage rates and a shortage of new homes being built would push up house prices by 5.3 per cent during the year, to an average of 172,500.

It then expects lower price growth of 3.4 per cent during 2011, followed by a strong rise of 9 per cent in 2012.

But it warned cuts in public-sector jobs and low wage inflation could limit the scope for house price inflation.

The group also predicts average mortgage rates will fall from around 4 per cent now to 3 per cent by the beginning of next year.