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Last Updated: Thursday, 6 July 2006, 11:29 GMT 12:29 UK
UK house prices go into reverse
House prices fell unexpectedly by 1.2% in June, according to Halifax, the UK's biggest mortgage lender.

The fall in prices follows several months where the UK housing market has been very buoyant, beating economists' expectations, particularly in London.

Householders were feeling the pinch because of rising utility and council tax bills, the Halifax said.

But overall, during the second quarter of 2006, UK house prices have risen 2.6% on average.

No crash

The bank, though, was keen to emphasise that June's fall did not necessarily mean that house prices were about to crash.

"Sound fundamentals, underpinned by a strengthening economy, high levels of employment and low interest rates, will continue to support housing demand over the second half of 2006," Martin Ellis, Halifax chief economist, said.

Price growth in the first half of 2006 had already exceeded the bank's and many other economists' expectations.

House prices had risen in all parts of the UK, apart from Wales, during the second quarter, the Halifax added.

But the Halifax survey will add to the weight of evidence that the market has slowed as spring has rolled into summer.

Last week, Nationwide said that house price inflation in June was subdued at 0.3%.

Howard Archer, chief UK economist at Global Insight, predicted that UK house prices were "likely to settle back into an extended period of relatively modest rises".

Mr Archer added that the recent trend of house price inflation outstripping earnings was squeezing affordability.

Despite the sharp fall in prices during June, the Halifax's figures continued to show annual price inflation accelerating.

The annual rate went up to 9.4% last month, as against 9.1% the month before.

The bank attributed this apparent acceleration to a weak market a year ago, when prices were largely flat during the first half of 2005, rather than to a particularly strong market now.

Mortgage equity withdrawal

Other figures, from the Bank of England, show that there has been a strong revival in the willingness of people to borrow against the rising value of their homes.

Mortgage equity withdrawal (MEW) in the first quarter of 2006 stood at 12.5bn, almost double the amount of 6.5bn which was borrowed in the first quarter of 2005.

That figure had represented a sharp slowdown in MEW which hit record levels in 2003.

The latest figures mean that since the start of the decade, UK homeowners have borrowed an extra 229bn by expanding their mortgages.

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