Hot properties 'will see price falls

Mortgage bank Bradford & Bingley yesterday warned that the housing market was set to slow markedly this year, with prices likely to fall in those areas that have seen exceptional growth during the past 18 months.

B&B, a specialist mortgage lender which also operates one of the largest estate agency networks, said: "We remain cautious about market conditions."

It expects average prices in the UK to rise by about 5% this year - in contrast to the 25%-30% growth seen last year.

While the Halifax and Nationwide figures for January appeared to show the market was still fairly strong, recent data from the Land Registry suggested it was slowing, with the downturn being felt most acutely at the top end of the market.

"We expect house prices to grow more slowly in 2003 and even to fall in those areas that have seen exceptional growth in the last 12 to 18 months," said B&B. Its comments yesterday came as the bank reported an 8% rise in pre-tax profits to £273m last year - at the top end of expectations.

Total new lending jumped 73% to £5.8bn in the 12 months to December 31, fuelled by low interest rates which have led to record levels of remortgaging.

Christopher Rodrigues, the chief executive, said the bank was interested in buying other businesses in the mortgage broking and financial advice sectors to add to acquisitions, including mortgage broker Charcol. "With the markets where they are, some good businesses come up for sale. We are potentially buyers if the right opportunity comes up," he said.

B&B itself has often been at the centre of takeover speculation since floating on the stock market in December 2000, and yesterday was no different.

Banking analysts at Fox-Pitt Kelton said the key issue for B&B was "whether it will be taken over", adding: "We believe that [a] bid at up to 400p is a realistic possibility with Barclays being the most likely buyer." B&B has often been cited as a target for Barclays.

Mr Rodrigues said there was "always speculation" and he never commented on it. Yesterday the shares closed down 6.5p at 274.5p.

· Figures yesterday from property website Rightmove showing that annual house price growth fell from 26.5% in January to 23.5% in February "provides further evidence that themarket is heading for a soft landing", said the company, which claims to cover 30% of all estate agents.