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Last Updated: Wednesday, 4 October 2006, 07:35 GMT 08:35 UK
UK house prices show strong rise
Browsing at an estate agent
Housing market activity remains "healthy", the Halifax says
House prices rose by 1% in September and are increasing at an annual rate of 8%, according to the Halifax, the UK's biggest mortgage lender.

This is the second month in a row that house prices have shown a strong rise, potentially adding to the case for an interest rate increase.

Halifax added that sound fundamentals would "continue to support a healthy housing market over the coming months".

The Bank of England will announce its latest rate decision on Thursday.

Market predictions

House prices could well see further marked increases in the very near term
Howard Archer, Global Insight

So far in 2006 UK house price inflation has outstripped analysts' expectations.

At the start of the year, both the Halifax and Nationwide predicted that prices would rise by low single digit figures.

However, according to the Halifax, annual house price inflation is running at 8%.

A combination of factors seem to be adding buoyancy to the market, among them high employment, rising incomes and - for the moment - comparatively low interest rates.

Nevertheless, the Halifax said that higher utility bills and August's decision by the Bank of England to raise UK interest rates by a quarter of a percentage point were likely to dampen demand in the housing market at the back end of 2006.
Graph

In fact, Halifax described the housing market as having reached a "plateau."

However, Howard Archer, chief UK economist at Global Insight, said that in the short term house price inflation would carry on unabated.

"House prices could well see further marked increases in the very near term, given the current level of mortgage activity, survey evidence showing strong buyer interest, strong demand from the buy-to-let sector and a shortage of properties in some areas," Mr Archer said.

Regional variations

House price inflation was strong in most parts of the UK; 10 out of the 12 regions measured have seen increases during the third quarter of 2006.

Northern Ireland, the south west and south east of England saw the strongest price growth during the three months to September.

But Halifax said there were "modest falls" in Yorkshire and the East Midlands "reflecting the increasing affordability difficulties for buyers as a result of the very rapid rise in house prices in these parts of the country over the past few years."




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