U.K. House Prices on Shaky Foundations - WSJ.com

U.K. House Prices on Shaky Foundations - WSJ.com

LONDON—U.K. house prices rose unexpectedly for a second consecutive month in March, data showed Thursday, but weak mortgage-lending figures and a Bank of England policy maker's forecasts of higher mortgage rates suggest the economist forecast is overcast.

Nationwide Building Society said average house prices rose 0.5% in March and a revised 0.7% in February, higher than its initial estimate. Prices in March grew 0.1% in annual terms.

But economists at Barclays Capital said a durable recovery in house prices is doubtful because of the many pressures buffeting the economy, including continued rises in unemployment and inflation, and very poor readings of household confidence.

"A revival in the housing market is unlikely while the job market remains weak, real wage growth is negative and consumer confidence subdued," they said.

In another factor likely to hold back the housing market, David Miles, a member of the BOE's Monetary Policy Committee, said mortgages are likely to become more expensive in future.

Mr. Miles said the spread between mortgage rates and the BOE base rate will grow because mortgage lenders have abandoned the easy lending practices that contributed to the recent housing boom and ensuing slump.

The prospect of higher interest rates from the BOE is already bearing down on the housing market, data from the central bank showed Thursday.