Halifax records 1.2% house price rise

House prices rose by 1.2% in September as activity in the market gathered pace, according to figures out today from the UK's biggest mortgage lender.

The Halifax said that although prices were up 1.8% in the third quarter of 2005, annual price inflation had slowed significantly over the past 12 months.

The annual rate of inflation now stands at 3%, down considerably on the 20.5% recorded in the third quarter of 2004.

The lender said that over the past year four regions had seen prices fall. Values had been eroded most in the south-west, falling 1.5%, while in the south-east they were down 1.1%, in East Anglia they fell by 0.8% and in the east Midlands there was a 0.4% fall.

The biggest rises have been in the north-west, with prices up 9.1% on last September, and Yorkshire and the Humber, where homes are worth 8% more than last year.

Halifax's chief economist, Martin Ellis, said the pick-up in monthly house price inflation in August and September was consistent with the rise in market activity over the past few months.

He highlighted figures for August from the Bank of England which showed that 15% more mortgages were approved during the month than in August 2004, and a report from the Royal Institution of Chartered Surveyors (Rics) which showed that new buyer enquiries had risen for the third month running.

"Healthy household income growth and historically high levels of employment are supporting the housing market and the Bank of England's decision to cut interest rates in August also appears to have given the market a boost," he said.

"Nonetheless, the reduction 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."

Howard Archer, chief UK economist at consultancy Global Insight, said that although Halifax's figures would undoubtedly fuel speculation that house price inflation "may be stirring again", he was sceptical about there being any sharp rise in prices in the short term.

And he added: "If house prices start accelerating markedly again, we believe buyer interest will quickly wane."

Last week Nationwide building society said house prices had fallen by 0.2% in September, bringing the annual rate of inflation down to 1.8%.

This is the second consecutive month in which the lenders have given different reports on the state of the housing market - while Nationwide's figures for August showed a 0.2% fall in values, Halifax reported a 1.6% rise.

At the time, Martin Ellis said the difference was down to timing.

"We do report a full calendar month, it runs from the first through to the end of the month," he said.

"Nationwide actually cut theirs off a week early, they have a month's data but they cut it off early so they would have been missing out the last week of August which our figures suggest was actually quite a buoyant period a lot of activity around the bank holiday."

He added: "You do find there's actually a remarkable level of consistency between them if you take a long-term view."