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Monday, August 2, 1999 Published at 21:37 GMT 22:37 UK

Business: The Economy

House prices taking off

Low interest rates have helped fuel explosion in house price inflation

House prices in the UK have increased at the fastest rate this decade over the past three months, according to the latest Halifax survey.

The bank's monthly house price index rose by a seasonally adjusted 2.2% in July, giving a yearly rate of 8.2%.

The BBC's Greg Wood: "Prices are rippling out to other areas"
This is the highest annual level of house price inflation since December 1996.

In the three months to the end of July, houses became 6% more expensive - a level of price inflation not seen since the 1980s boom. The average house now costs £78,443.

Once again, the biggest increases were seen in the south-east of England, particularly in Greater London where property shortages are driving up prices.

The Halifax said the growth of the UK housing market would continue over the rest of the year, but that it did not expect a return to the boom conditions.

Growth picking up

A spokesman said: "The sharp turnaround in the housing market since the spring was maintained in July as the historically low level of mortgage rates and the marked improvement in the economic climate continued to provide a boost to the market."

The Halifax survey comes after a series of reports suggesting the UK housing market has been picking up pace.

With mortgage rates at levels not seen for 30 years and consumer confidence rising, it was perhaps inevitable that house prices would begin to take off.

However, rates are still below those of the notorious late 1980s, when figures in excess of 3% a month were recorded.

Turnover is also below the levels of the last years of the 1980s, with the number of house sales static for the past two years.

Unexpectedly strong growth in the UK economy has fuelled rumours of an imminent interest rate rise, which could help to dampen the house price inflation.

The Halifax House Price Index is drawn from analysis of mortgage applications made to the company, the country's biggest mortgage lender.

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