Lender predicts 'modest impact' from rate rise

The anticipated rise in interest rates will not damage the housing market, according to Halifax.

"Most commentators now expect the monetary policy committee (MPC) to announce a small increase in the cost of borrowing later this week. A 0.25% rise in interest rates will add around ?4 a week to a typical ?80,000 mortgage - a figure which can easily be absorbed by the vast majority of UK households," said Martin Ellis, the bank's chief economist.

Halifax expects no more than a "modest impact" on the housing market as a result of an increase in interest rates, citing good employment levels as a major factor in the market's continuing strength.

Ray Boulger, senior technical manager at mortgage broker Charcol, agreed: "Any change in rates must have some effect, although it may not be major."

He added: "Any impact will be hard to measure because of discrepancies in the different house price indices." Halifax's house price index is one of several, each of which use different methods to measure changes in the market.

According to Halifax, house prices rose again by 1.2% in October, putting annual inflation at 16.7%, compared to the 24.5% annual increase seen this time last year.