Britain’s housing market will suffer a sharp slowdown in the second half of the year, leading to the average annual property price rise perhaps being as little as 5 per cent, Nationwide, the UK’s second-biggest mortgage lender, has cautioned.

Graham Beale, the new chief executive of the building society, said: “Our forecast for house price growth is 5 per cent to 8 per cent in 2007, reflecting a cooling in the second half of the year as increased interest rates filter through.”

Nationwide’s latest survey, published at the end of April, showed annual price inflation at more than 10 per cent, with London and southeast England leading the way. Other surveys, including research by the rival Halifax, have shown an annual growth pace of up to 10.9 per cent for the whole country and 14 per cent for London.

However, Mr Beale stuck to his forecast that property prices will grow this year by between 5 and 8 per cent – a prediction first made by the lender almost six months ago.

We need more homes

Home ownership fell last year – and that must be reversed,

Background

• Will further interest rate cuts boost the housing market next year?

• A guide to the housing market forecasts

• The property market: a bleak future?

Background

• All set for slowdown

• Homes in N Ireland rise 54% to London levels

• House prices: top hotspots ... and the coolest

• What do Chelsea and Belfast have in common?

The London property market

Background

• Is the property boom finally over?

First-time buyers priced out

Houses will become completely unaffordable for first-time buyers unless many more are built, a national advisory unit says

• Reform of planning rules ‘vital’ to meet growth in demand

• How the mortgage market has changed

• The future of house prices: 10 times pay

Background

• Property prices grow at slowest rate in five months

• Buying a house 'will cost 10 times your income'

• How the mortgage market has changed

• First proof of decline in housing market

• Buy-to-let brigade could be the joker in pack

No one is suffering as much as first-time buyers

Lenders are getting more picky, yet property prices are refusing to fall far enough, fast enough

Background

• First proof of decline in housing market

• Fresh signs of cooling housing market

• House prices slow despite London surge

Background

• Mortgage slowdown triggers house price fears

• Buy-to-let tax shock

• Fall in mortgages raises fears of slowdown

• Signs emerge that UK housing is off the boil

• Interest rates put brake on house prices

End of house price boom is in sight

Societies saw an 8% drop in mortgage approvals last month compared with a year ago, the first such fall since 2005

Background

• Nationwide says slowdown may limit price rise

• House prices keep on rising

• Your guide to surviving the rate hike

• The return of negative equity?

Housing costs taking their toll

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash?

Nationwide delivered its forecast as it reported a 16.6 per cent increase in pretax profits to £652 million, which it attributed in part to surging house prices. Britain’s biggest building society said that its net lending to residential customers was up by 77 per cent, at £11.2 billion, giving it a 10.2 per cent share of the mortgage market.

The surge in lending by the building society suggested that it was pushing heavily into the market while others scaled back in the light of increased borrowing problems among consumers hit by successive rate rises.

However, Nationwide countered that its problem loans were 25 per cent below its peer group.

The society’s assets, which also include savings, loans and insurance policies, rose by 13.9 per cent over the year to £137.4 billion.

Nationwide put its success in almost doubling prime mortgage net lending down to strong borrower demand for products, such as its recently launched 25-year fixed rate, and the society’s ability to retain customers.

The society said that “good service and an active policy of customer contact” helped to increase lending last year, alongside competitively priced products for both new and existing borrowers.

Nationwide is traditionally better known as a prime lender, but its has been growing its niche offering, with its nonconforming business, UCB, seeing a 12 per cent increase in lending last year.

Earlier this year, Nationwide struck a deal to merge with the Portman Building Society, its nearest and smaller rival. That deal is expected to be completed at the end of August.

The merger will see up to 900 jobs cut across Nationwide and Portman, Mr Beale said. The 500 staff cuts already announced in March were set to almost double within two years as the group looks to trim jobs in the combined business.

About 250 jobs are set to go at Portman’s Bournemouth head office, which will instead become an administration centre, with another 250 due to be cut when Portman’s Wolverhampton base is closed at the end of the year.

Mr Beale said that Nationwide now expected a further 100 jobs to be shed within the combined retail network, “at a management level”, with another 200 to 300 job cuts to come, largely expected to be within Nationwide’s UCB sub-prime lending business.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• B&B shareholders forced into funding rescue
• John Lewis department store sales plunge 8.3%
• Families turn to credit to cover mortgage bills