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Last Updated: Friday, 3 October, 2003, 08:50 GMT 09:50 UK
House price growth 'still strong'
House price growth remained strong in September, figures from the UK's biggest mortgage lender show.

The cost of property rose 1.5% in the month, driving the average cost of a home up to 135,958, the Halifax said.

The UK's biggest mortgage lender added that a combination of low interest rates and high employment levels was continuing to support demand, as other indicators showed there had been a pick-up in activity in the market.

Halifax chief economist Martin Ellis added: "In contrast to the second quarter of the year when there were modest falls in London and the South East, house prices increased in all the regions of mainland Britain during the third quarter."

Halifax's figures contrast with a gloomy forecast from consultancy firm Capital Economics which predicts house prices are set to fall by 20% over the next 18 months.

House prices are at dangerously high levels
Capital Economics

The lender's latest monthly growth figure was up on August's 1.3% and July's 1.4%, and also outstripped the 1% increase reported by Nationwide earlier this week.

But the rate of annual house price inflation continued to slow, easing to 18.6% for the year to the end of September from 19.1% in August.

Slowdown predicted

The group predicted that the annual rate of price growth would ease over the next two months.

However, pointed out that Bank of England (BoE) figures showed there had been a pick up in activity on the market, with mortgage approvals rising to 114,000 a month in the three months to August - up 19% on the previous three months.

Meanwhile, the north remained the key hotspot for house price increases, with the cost of a home in the north 38% higher than a year ago.

In Yorkshire, Humber and Wales, prices were 32% higher.

And in Scotland, strong price increases in the past six months have seen the annual rate of house price inflation more than double from 7% between July and September 2002 to 20% in the same period this year.

By contrast, prices in Greater London were just 9% higher than a year ago.

But in the last three months prices in the capital rose 2.1%, after recording a 0.7% fall during the April to June period.

Price gap narrows

In the south east and south west they were up 12% on last year and increased 16% in East Anglia.

The Halifax also said the north-south price gap had narrowed slightly over the past year.

The average price of a house in London is now 129,100 higher than in the north, down from 137,300 during the same quarter last year.

But Mr Ellis warned that the property boom in the north meant average prices there are higher in relation to earnings than they were a year ago.

He added this could act as a brake on the market in regions outside the south and Midlands over the coming 12 months.

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