Falling interest rates and competition among mortgage lenders will keep the market alive and well

Clive Wood head of mortgages, HSBC

The news comes on top of reports by both the country's largest mortgage lenders - the Halifax and Nationwide - that show house prices already about 7.5% higher than the same time last year.

But the global economic slowdown and the foot-and-mouth epidemic will also take their toll, warns the report.

'Alive and well'

Price rises in the Midlands and Wales are likely to be affected by the economic slowdown, which has led to extensive job losses in these areas.

And the foot-and-mouth epidemic will temporarily hit the market in parts of the north and the south west of the country.

But there are fewer negative factors in the south and south east, where the average house price is set to rise by 8% during the year.

However, high prices may then keep the buyers at bay and could in turn start to force prices lower, warns the report.

The number of house sales is set to increase by 5% as people take advantage of low interest rates to move.

"Falling interest rates and competition among mortgage lenders will keep the market alive and well," said Clive Wood, head of mortgages at HSBC.

The report concludes that the quarterly Housing Barometer, which measures the stability of the housing market, is "firmly placed" in the settled band.