Homebuyers scramble for mortgage bargains

House prices surged in February with buyers taking advantage of the lowest mortgage rates for almost half a century, Britain's biggest building society said yesterday.

House prices surged in February with buyers taking advantage of the lowest mortgage rates for almost half a century, Britain's biggest building society said yesterday.

Nationwide said the average price of a home rose by 1.6 per cent, or £1,734, in February to £94,965. Prices are now 14 per cent higher than they were a year ago and Nationwide admitted it would probably have to scrap its forecast for a rise of only 5 per cent this year.

"These are excellent economic conditions for housing," said Alex Bannister, its group economist. "There are no obvious factors which could significantly undermine housing prospects." He said the lowest mortgage rates since 1955 meant buyers could still afford to enter the housing market despite high prices, especially in London. "On this front things have rarely been better," he said.

But alarm bells are ringing at the Bank of England. Charlie Bean, its chief economist, said he was worried by the volume of debt homebuyers were taking on. "If were this to continue at a very high rate that might lead to problems down the road," he told the Commons Treasury Committee.