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Rate cuts may have boosted home prices in UK

HOUSE prices in Britain increased for the first time in nearly a year and a half during March, one of the country's biggest mortgage lenders said yesterday, providing some tentative evidence that massive interest rate cuts from the Bank of England may finally be beginning to entice buyers back into the market.

Nationwide Building Society said house prices rose 0.9 percent in March from the previous month - the first gain since October 2007.

In February, house prices in Britain had fallen by a monthly rate of 1.9 percent.

Despite the monthly rise, Nationwide's chief economist Fionnuala Earley sounded a note of caution.

"While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached," she said.

She said it will take time for the BOE's rate cuts and its new policy of boosting the quantity of money in the economy to work through into the housing market, and before a sustained recovery in house prices can begin.

Since the financial crisis got particularly acute last October, the BOE has slashed its key interest rate from 5 percent to a record low of 0.5 percent and has embarked on quantitative easing - buying financial assets, notably government bonds from commercial banks - in the hope they start lending to borrowers and businesses.

The news from Nationwide comes just days after the BOE indicated that the housing market may be stabilizing. In its monthly overview of the mortgage market, the BOE said mortgages given to buy houses rose 19 percent in February to 37,937 - its highest level since May 2008.


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