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Tuesday, November 2, 1999 Published at 10:28 GMT

Business: Your Money

House prices 'booming'

Despites the price rises, homes are still more affordable now

UK house prices jumped last month by their biggest margin since the height of the 1980s housing boom, according to figures from the Halifax.

The BBC's Chris Giles: "SInce the spring house prices have been rising above 10% a year"
The country's biggest mortgage lender says the value of the average house rose by 2.8% in October to £81,402.

Prices rose by 10.8% in the year to October.

The figures confirm previous surveys which have reported double-digit house price rises over the last year. Last week, Nationwide said annual house price inflation was 11.6%.

During the past 15 years, the Halifax survey has reported a bigger monthly price rise only at the height of the 1980s property boom - in the summer of 1988.

Figures confirm boom

Halifax economist Martin Ellis said the jump should be regarded as a sign of a sudden boom. "It is one of the largest rises we've recorded," he said.

However, he pointed out that the monthly figures "can jump around a bit and only last month we were reporting a very small fall in house prices".

Mr Ellis said the overall trend was for house prices to keep rising but for the rate to slow down once the expected interest rate hikes took effect.

"Our view is that there are more rate rises in the pipeline and that will help cool the market."

The Bank of England's Monetary Policy Committee will meet to decide interest rates on Wednesday and its decision will be announced at midday on Thursday.

Mr Ellis predicted that the MPC would increase rates by 0.25% to 5.5%.

Homes still affordable

Although house prices continue to rise, homes are still relatively cheap in relation to average earnings.

The average house costs three and a half times average earnings.

The average ratio over the past 15 years has been 3.7 times earnings and in 1989 the average house sold for five times average earnings.

Also, lower interest rates are keeping down the cost of owning your own home.

Homeowners spend an average 19% of their income on their mortgage. The average over the past 15 years has been 24%.

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