WE were warned last year that the house price bubble was about to burst. Then, at the beginning of this year, we were told that prices would start to level out.

But figures published by Nationwide this week show that higher interest rates failed to deter buyers from moving into the property market this month, with house prices nationally rising by 1.9 per cent.

Buying a house in the UK is almost 20 per cent more expensive this year than last.

Good news for those who bought their homes before prices took off, but bad news for first-time buyers.

The figures add to the pressure on the Bank of England's monetary policy committee (MPC) to follow the increase in the cost of borrowing to 4.25 per cent earlier this month with another rate rise to cool the market.

The quarter per cent rises imposed by the MPC have so far had little, if any, effect.

According to Nationwide, growth is faster in the North-East than anywhere else in the UK except Wales.

Some desperate first-time buyers, priced out of the market, are hoping for Government intervention.

Others, mortgaged to the hilt, fear another housing crash similar to 1987, when high unemployment and a steep rise in interest rates led to thousands of homes being repossessed.

Experts say the market will reach a natural peak before levelling out, helped by further gentle rate rises from the MPC.

But estate agents, including Andrew Potter, of J W Wood, in Darlington, believe demand is so high that prices will continue to rise.

He said: "When this housing boom started, the experts said it would only last a few months. It has gone on for three years now and I really do not think it will slow down unless there is a catalyst to do that, such as a massive rise in interest rates - but I think the Bank of England is unlikely to do that because it needs to remain competitive on the cost of borrowing.

"Demand is exceptionally outstripping supply and unless there is a crash, which is unlikely, or a catalyst like interest rates to stop prices rising, they will continue.

"The North-East has shown greater stability than other regions in terms of prices, so it would be very unlucky if we have a major problem here."

Professor John Wilson, director of Teesside Business School, said he believed prices would level naturally.

He said: "If we look at the long-term relationship between house prices and average income, there will be a correction in the housing market before long - the prices are just not sustainable.

"I would be very surprised if there was a housing crash."

He said that people migrating from London to take up jobs in the North-East could be fuelling some of the region's house price rises.

"Some people are migrating out of the capital and their money goes a lot further in the North-East than it did in London," he said.

"So pockets of the region, such as Gosforth, are very expensive, yet other parts are still cheap. It is very difficult to generalise about the region."

Kerry Hanson, senior economist at Nationwide, also said he believed the market would level off without intervention, starting from the end of this year.