2% rise in 2008

House prices are set to increase by two per cent in 2008, according to the latest forecast.

Spicerhaart believes that the global credit crunch will continue to affect the market in the new year but anticipates that growth will remain positive.

Homeowners will welcome the news and should be given another boost with the firm predicting that the base rate of interest will be cut twice in the next 12 months.

"The credit crunch does seem set to continue into 2008. This will produce a subdued environment characterised by low average price growth of around two per cent, although some areas, such as regeneration hotspots, will prove more buoyant," said Spicerhaart's Steve Cox.

"The Bank of England will need to drop interest rates to ease affordability constraints and stimulate the property market. We therefore predict two reductions of 0.25 per cent, with the first relatively early in the New Year.

"As affordability constraints are eased and demand continues to outstrip supply, the long term future is set to be bright and we expect the housing market to return to its previously higher levels by 2009," he continued.

The base rate of interest currently sits at a six-year high of 5.75 per cent.

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