Analysts took differing views over the rate of house price inflation although many thought the figure stood somewhere between 10% and 15%. John Butler of HSBC says that the figures were 'A very good indicator of house price inflation. Our calculations suggest this is pointing to inflation rising from 10% currently to 15%.'

In the past year, house prices have risen 11% to an average of £89,962, a rate which the Nationwide building society recently said was 'clearly unsustainable.' However, while 15% inflation in house prices would prompt grave concern, and discourage further cuts in interest rates, it still is nowhere near as high as it was in 1988 when house prices soared by 29%. A number of homeowners are taking advantage of cheap mortgages in order to spend on home improvements, even new cars and holidays.

Richard Donnell, head of research at agency FPD Savills, did not think that prices would rise by as much as 15%. He says, 'House prices usually rise in line with average earnings, or a bit ahead of that for the next few years as people's monthly interest rates are not that high.' FPD Savills has forecast that mainstream UK house price growth looks set to moderate to 8% in 2001 with a similar level of growth in 2002.