Montlake forecasts rising house prices this year

He said house price rises could rise between 5 per cent and 8 per cent this year, although they might fall back in 2015.

He said: “For 2013 we felt cautiously optimistic. We had a few false dawns before, with all the talk of Funding for Lending and a clutch of new policy initiatives to try to help the beleaguered housing market and get lenders to lend. “So last year, we thought that house prices would rise by at least 3 per cent, the Bank of England base rate would stay at 0.5 per cent, mortgage lending would hit the £158bn level, and the FTSE would break 6,300 and work towards the 6,500 level.”

While most of these predictions seemed accurate – monetary policy remains tight in the UK and the FTSE100 finished 2013 at 6,731.30 – Mr Monlake said he was more confident about 2014 than he had been in 2013, despite talk of the housing market having “more potential bubbles than an Aero”.

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Mr Montlake added: “We think the base rate will remain stable at 0.5 per cent for most of the year – with maybe a twist towards the end – and that mortgage lending will touch £200bn. The FTSE potentially hitting a record high at 7000 seems fair.”

Mr Montlake’s views are not far off economic consensus. Joe Dyer, head of portfolio management for RC Brown Investment Management, said: “The key drivers for the UK economy last year were consumption and the recovery in the housing market.

“While it is now likely that the economy will surpass its pre-financial crisis peak during 2014, the country has done little to deal with its high levels of indebtedness. The governor of the BoE, Mark Carney, will need to keep a close eye on the housing market, but as things stand, the wider tool box at the BoE’s disposal – instead of direct action on interest rates – continues to be the preferred approach.”