Halifax contradicts housing gloom by recording prices up 1.2% in September

House prices leapt 1.2% last month, according to the Halifax, Britain's biggest mortgage lender. Its assertion that a typical home has seen almost £5,000 added to its value in the past two months will confound those who thought the property market was in the doldrums.

The Halifax said last month's rise lifted the average price of a home to £168,299. It followed a 1.9% increase in August. The figures may fuel hopes that the worst is over and house prices are recommencing their upward trajectory.

However, the lender appears to be out of step with rivals, several of whom have reported price falls over the same period. Last week, Nationwide building society said property values slipped 0.2%, while the research group Hometrack reported prices down for the 15th month in a row in September.

Martin Ellis, Halifax's chief economist, said the pick-up in house price growth in August and September "is consistent with the rise in market activity over the past few months". Healthy household income growth and high levels of employment are helping, and the Bank of England's decision to cut interest rates in August appears to have given the market a boost, he added.

The bank also pointed to the latest report from the Royal Institution of Chartered Surveyors, which recorded an increase in completed property sales for the second successive month in August, and new buyer inquiries up for the third consecutive month. Regionally, the biggest winners over the past three months have been the north of England and Northern Ireland, where prices have risen 6.6% and 4.5% respectively between July 1 and September 30. Prices in London rose by 3.8% following four successive quarterly falls in the capital.

However, the Halifax does not foresee a "sustained surge" in house prices. It points out that the annual rate of UK house price growth is now running at 3% - far below the 20.5% notched up a year ago.

This UK-wide annual growth figure disguises wide regional variations. In the north-west of England, prices are 9.1% higher than a year ago, with Yorkshire and the Humber not far behind at 8%. By contrast, four regions have experienced small falls during the past 12 months: south-west England (down 1.5%), the south-east (down 1.1%), East Anglia (down 0.8%) and the east Midlands (down 0.4%).

"The slowdown in economic growth this year and the continuing high level of house prices in relation to average earnings are expected to constrain housing demand and prevent a sustained surge in house prices," said the Halifax.

Howard Archer, chief UK economist at Global Insight, said the new data would undoubtedly fuel speculation that house price inflation may be stirring again. But he added: "We remain sceptical that house prices are set to see sustained sharp rises any time soon."

Property split
Why indices differ

Halifax and Nationwide are again at loggerheads over how the housing market is performing. So what's going on? Both lenders base their figures on transactions, weighting the findings to take account of regional variations and the mix of properties sold. Some experts say transaction-based indices don't give a full picture because they don't reflect which parts of the market are selling or not. Others say they are better because they show the actual prices of homes sold. This month Nationwide has an ally in research group Hometrack, which compiles its index from price data received from up to 3,500 estate agents. Hometrack's verdict was that house prices fell 0.1% in September.