Halifax: house prices up 2% in April

House prices increased by 2% in April, bringing the annual rate of price inflation to its highest in 13 months, according to the mortgage lender Halifax.

The bank said that in the first four months of this year, average prices across the UK rose by 4.4% to reach £178,992 as high levels of employment and low interest rates supported the high demand for homes.

March was the sixth successive month in which sales agreed by the bank's estate agency were higher than in 2005, and the number of sales agreed in the first three months of this year was up 15% on the same period last year.

However, the bank said a slight softening in the labour market in recent months, combined with higher council tax and utility bills, were likely to curb demand and prices in the second half of the year and bring inflation nearer to the 3% it predicted at the start of the year.

Martin Ellis, Halifax's chief economist, said: "While the market may remain relatively buoyant over the coming few months, we expect the recent softening in the labour market and the continuing high level of house prices in relation to earnings to curb demand.

"Alongside higher utility and council tax bills, these factors should lead house price growth to moderate in the second half of 2006."

The strong performance of the housing market so far this year is likely to be a factor in the Bank of England's latest interest rate decision, due to be announced at lunchtime today.

"The 2% jump in house prices in April reported by Halifax is a real shock that will heighten concern that prices are gaining excessive upward momentum," said Howard Archer, chief UK economist at consultancy Global Insight.

"The Halifax data is likely to reinforce Bank of England concern that any trimming of interest rates could further stimulate the housing market and risk send housing prices markedly higher.

"Indeed, the Halifax data is likely to boost belief that the next move in interest rates is up."