British house prices rose strongly again in March and are now expected to gain 15 percent rather than nine percent in 2004, the Nationwide building society said on Tuesday, adding pressure on the central bank to raise interest rates.
The Nationwide said house prices rose 1.4 percent on the month in March after the huge 3.1 percent gain in the month before. This meant the annual rate fell to 16.7 percent from 17.1 percent in February.
But in a sign the housing market in Britain is not slowing down as expected, the Nationwide raised its forecast for house price inflation for 2004 to 15 percent, roughly the same as 2003, from 9.0 percent before.
Economists said the recent pick up in the housing market raised the risk the Bank of England would hike interest rates at its Monetary Policy Committee meeting next week.
"We now expect the next 25 basis point interest rate hike to occur next Thursday rather than in May," said Howard Archer, economist at Global Insight.
Policymakers are worried the longer the house price boom goes on, the greater the risk of a crash, and have already raised interest rates twice since November.
But Nationwide said there was little chance of this happening.
"While the latter half of 2004 is likely to see slower growth in prices, a slump remains unlikely," said Alex Bannister, Nationwide's group economist. "Despite a rise in interest rates, there is little chance of a significant economic downturn this year. "Nationwide said the average house this month cost 142,584 pounds compared with 138,730 pounds in the previous month.