A senior economist has warned about the dangers of a house price bubble, following figures that show prices are surging with forecasts that house price inflation could reach 8% in 2014.
In its latest monthly survey, Nationwide said prices across the UK are now 5.8% higher than this time a year ago. That figure is up from 5% only a month ago.
Howard Archer, the chief UK economist with IHS Global Insight, warned that policymakers need to be vigilant. 'The acceleration in house prices ... will fuel concern that we could be on our way to a new housing bubble,' he said.
He added that the UK is 'currently some way off from an overall housing market bubble' but warned that the Government will need to act 'quickly and decisively' if the housing market does become overheated.
He is forecasting that house price inflation could reach 8% in 2014.
Earlier this month, Peter Spencer, the chief economic adviser to the EY Item Club, said that the chances of seeing another housing market bubble are 'extremely slim.'
Nationwide has also said that prices increased by 1% in October, taking the average price of a home in the UK to £173,678.
However, it pointed out that prices are still 7% below their peak in 2007.
It also said that mortgages remain unusually affordable. 'Typical mortgage servicing costs remain modest by historic standards, thanks to the ultra-low level of interest rates,' said Robert Gardner, the Nationwide's chief economist.