Lower interest rates boost house prices

House prices rose by 1.6% last month, boosted by low interest rates and a fall in unemployment, according to the latest Halifax survey of house prices.

The annual rate of house price inflation increased to its highest rate since early last year, rising from 7.3% in May to 9.7% at the end of June.

The average cost of a house moved up to £92,122 and the bank said prospects for the housing market remained "positive" with prices likely to rise during the rest of 2001.

The figures echoed a Nationwide Building Society survey which showed a 1.9% increase in house prices last month.

June's increase was similar to the rises recorded in April and May, and led to a price increase of 5% during the second quarter - equivalent to annualised growth of 20% - after a slowdown last year.

Halifax said: "The renewed buoyancy in house prices in the past few months has been stimulated by the recent series of mortgage rate cuts.

"The continuing decline in unemployment and the healthy state of the household sector's finances have also supported housing demand."

The group added that property sales were "much less robust" than prices, with Inland Revenue figures showing that property transactions were still lower than they were a year ago.

It added that slower economic growth was likely to cause house price inflation to ease.