West Midlands house prices should go on rising for the rest of this year, but more slowly than in the first six months.

Nationwide building society yesterday followed Halifax in raising its UK forecast for 2006 to five per cent.

Last December, Nationwide predicted house prices would rise by between nothing at all and three per cent, while Halifax plumped for three per cent precisely. Both have now changed their minds in the light of the brisk performance of the housing market so far.

Regional variations tracked by Nationwide show this has not been entirely a London-driven phenomenon. The biggest regional increase was 14.7 per cent - over six months - in Northern Ireland, followed by Scotland, Wales and the North of England, all outpacing a 3.6 per cent gain in London.

In the West Midlands a rise of 2.3 per cent was among the more modest in the country, running well ahead of average earnings. It also contrasts with Nationwide's December forecast, which indicated that West Midlands house prices were more likely to fall than to rise this year.

The building society now expects West Midlands prices to go on rising in the coming months, but more slowly, to finish the year with a three per cent gain.

"We have seen a certain amount of investment demand in the West Midlands," commented Nationwide's economist Fionnuala Earley. "It is just a generally strong economic story.

"The car factory closures don't seem to have depressed people the way we expected. There is a general resilience in the area."

Across the UK, she attributed the strong housing market to a robust economy, stable labour market and lack of housing supply.

Official figures from the Land Registry reinforced the two mortgage lenders' findings, confirming that over the country as a whole house prices rose by the equivalent of 7.7 per cent a year in the three months to June. The number of homes changing hands jumped by almost a quarter.

Nationwide said last Thursday's interest rate increase is unlikely to crush demand for housing.

"Our initial view is that this is a pre-emptive move," Ms Earley said.

"Money markets had anticipated a rise, so fixed mortgages had already risen to around 5.2 per cent from around 4.8 per cent in early April.