House prices move higher in July

The rate of house price increase was down on the first half of 2004

UK house prices rose by 1.3% in July according to Halifax, the UK's biggest mortgage lender.

The bank's survey showed prices were marginally up on the 1.2% rise recorded in June, with prices up 22.1% compared with the same time last year.

The rise means that the average property now costs more than £160,000.

However, July's increase was well below the average for the first half of 2004 as four interest rate rises since last November took their toll.

Full impact

It seems clear we have not yet seen the full impact of the Bank of England's recent rate moves on the property market Martin Ellis, Halifax A guide to the price surveys

Most economists expect the Bank of England to raise interest rates again this Thursday, by a quarter of a percentage point to 4.75%.

According to the Halifax, the rate of monthly house price increase has slowed from an average of more than 2% for the first half of 2004.

Martin Ellis, Halifax chief economist, said that the summer slowdown was only the beginning.

"It seems clear we have not yet seen the full impact of the Bank of England's recent rate moves on the property market," he said.

"Accordingly, we expect the series of rate rises since late last year to continue to act as a brake on house price growth over the coming months."

However, some economists are calling for a dramatic rise in interest rates to dampen the UK housing market.

"The Halifax report adds to the pressure for a 50 basis point interest rate hike by the Bank of England on Thursday," Howard Archer, chief UK economist at financial information firm Global Insight, said.

Cooling evidence

Also on Wednesday, property website Rightmove said asking prices fell by 0.5% - or £900 - on average in the final three weeks of July.

Rightmove said the figure provided "incontrovertible evidence" that recent rate increases had cooled demand for property.

Rightmove's survey is based on the asking prices posted on its website.

It does not take account of the actual transaction prices agreed between buyers and sellers.

Rightmove claims to display about 35% of all properties on the market.