As we expected, the strong rebound in prices in October was temporary, driven by buyers postponing purchases until after the August base rate cut and the overall picture remains one of stability rather than acceleration,

If winter is colder than expected then prices could rebound quite sharply.

While there is uncertainty about the economy at present we still expect the next move in interest rates will be down and that this is likely early in 2006. But while the market responded quite swiftly to the rate cut in August, we do not expect a cut to cause annual house price inflation to accelerate back up to levels seen in early 2005.

Affordability and overall debt levels will still have to adjust to more comfortable levels before we can expect any widespread increase in demand and thus prices,

There is a supportive environment for prices. Nationwide expects the market to remain fairly stable in the next year.

Our expectation is that house price growth will remain firmly in low single digits in 2006 as the economy recovers.