Construction lag to cause rise in house prices, Nationwide cautions

Building society Nationwide has warned that a delay in building construction is likely to cause an increase in house prices over the coming months.

It said that the demand for homes was likely to rise as a result of a strong labour market, increase in wages and the prospect of interest rates remaining at 0.5 per cent.

Robert Gardener, Nationwide’s chief economist, said: "The concern remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability."

Nigel Wilson, chief executive of Legal and General, told BBC Radio 5 live: "We are obsessed with owning homes, we are obsessed with house price inflation which is socially exclusive, which isn't good for society and is very poor for young people finding it increasingly difficult to get on the housing ladder."

Data has also found that mortgage lending by major high street banks has increased through 2015, with The British Bankers Association (BBA) mandating that gross mortgage borrowing in December had increased by 24 per cent to £12.4 billion compared to the previous month.