House prices soar in September

House prices shot up in September at the fastest rate in a year, bringing annual house price inflation to 24.2% and the average London home to a value of over ?200,000 for the first time, said the Halifax today.

The average house rose in value by 4.3% last month, only the second time this year prices have risen by anywhere near that amount. In May they also rose by 4.3% but since then have been slowing down considerably, rising by just 0.2% in August.

Halifax said this had pushed annual house price inflation up from 18.8% in August to 24.2% in September. The bank was forced to revise its end of year annual forecast from 15% to 24%. However, the bank said it was sticking with its prediction that the market will slow over the coming year.

The difficulties faced by first-time buyers, in the south in particular, will constrain demand and cause house price inflation to ease, said Halifax's group economist Martin Ellis.

He added that despite the strong rises in house prices, the market remained affordable. Mortgage repayments currently make up the lowest percentage of people's pay packets since 1984, indicating that borrowers are not over-stretching themselves.

There appears to be little prospect of either a substantial rise in either interest rates or unemployment (the two developments that triggered the early 1990s housing market recession) over the forseeable future, he said.

The September surge in house prices has taken the average London home over the ?200,000 mark for the first time, while homes in both the East and West Midlands broke through the ?100,000 barrier.

The East Midlands led the house price rise, and has also seen the biggest rise in house prices over the past year with an increase of 38% compared to just 18% in London. Only one area has seen price rises slower than London and that is the North where the average house has increased in value by 16% over the last year.

The Halifax data supports that issued by Nationwide earlier this week.