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Lending giant HBOs has revised up its forecast for house price growth in 2007 from 4% to 6%.
It said this revision largely reflects the greater upward movement in prices than expected during the first four months of the year.
An increase of 6% would still be one of the smallest rises in house prices since 1995 and would be below the long-term average of 8% per annum recorded since 1983.
HBOS expects the UK economy to record its 60th successive quarter of growth in 2007 Quarter 2.
No other OECD economy can match the UK's unbroken 60 quarters of positive economic growth. The UK's unbroken stretch has seen it move from the 6th largest OECD economy at the start of 1992 to the fourth largest OECD economy now, moving ahead of Italy and France.
HBOS said pressure on householders' finances will curb housing demand. The increase in mortgage rates since last summer is having an effect on housing affordability and will increasingly bite over the second half of the year. Negative real earnings growth so far this year and rising food prices will also reduce the income households have available for housing, the lender said.
House prices are expected to rise most quickly in Northern Ireland (23%), Greater London (12%) and Scotland (10%) in 2007.
Annual house price inflation is expected to slow in all parts of the UK during the second half of 2007 as the impact of higher interest rates and the squeeze on householders' finances is felt.
The north/south divide is widening again. The gap between the average price in the south and that in the north is expected to widen by £14,500 during 2007 to almost £105,000 by the end of the year.
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