07/09/2005

Halifax reports house prices rise

House prices rose by 1.6% in August, the UK’s biggest mortgage lender, has reported.

However, the Halifax warned that the rise could be temporary, boosted by the recent interest rates cuts by the Bank of England. The price rise in August followed a modest 0.4% increase in July and was the biggest monthly rise since September 2004.

However, despite the increase in prices, Halifax warned that house price growth was only 2.5%, a significant from the 21.3% it stood at in August 2004.

The average house price in the UK was now £165,967, the mortgage lender said.

The Bank of England reduced interest rates from 4.75% to 4.5% last month, amid fears about slowing economic growth and a slump in consumer spending. It was the first cut in the cost of borrowing for two years.

Halifax said that August’s price increase mirrored two previous rises since 1997, when house prices rose following an interest rate cut. However, this proved to be a temporary rise.

Halifax said that it did not expect house price growth to rise in the coming months, but expected the market to remain broadly stable, due to the ongoing growth of the UK economy, earnings growth and high levels of employment.

(KMcA/SP)

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