House prices continue to climb

The upward surge in house prices is ongoing, with the annual rate of inflation now at its highest level since the property boom of the late 1980s, Britain's biggest mortgage lender Halifax said today.

July figures from the bank show that the annual rate of house price inflation in the UK is now 20.8%, up from 19.3% in June and the highest level for 13 years. However, indicators are that the market could be slowing as prices rose by 1.9% in July compared to a 2.4% rise in June and a 4.3% rise in May.

The figures confirm the findings of Nationwide last week: while also recording a slowdown in growth from June, the building society said that house price inflation is now running at 21%, also adding that this was the highest figure since June 1989.

Despite heightened fears of a housing crash, akin to that witnessed in the early 1990s, Halifax has stuck with its prediction that the market will slow gradually rather than fall off a cliff edge.

"Indicators of housing market activity, while confirming a buoyant marketplace, also show some early signs of slowing," said Gary Styles, Halifax's head of group economics. "We expect house price growth to slow in the coming months as more sluggish income growth, higher interest rates and lower buy-to-let volumes reduce overall demand levels in the market."

Recent figures from the Bank of England also indicate a slowdown in the market, with mortgage approvals down ?2bn in June from the previous month.

The shortage of houses for sale, especially in London and the south, has been the major driver for house price inflation, said Halifax, with the stock of unsold property with estate agents at its lowest level for over 20 years.