UK house prices rose in August

7 September 2006

House prices rose by 1% in August – bouncing back from a surprise drop in July – according to the UK’s biggest mortgage lender.

The Halifax said that while the UK housing market remained strong, there were signs that house price growth “continues to moderate”, due to factors like higher interest rates and energy bills.

It added that annual house price inflation was at 8.2% in August, down from 8.8% in July. The Halifax found that the average property now costs £179,043 and said market activity was “firm”, with Bank of England figures showing that the number of mortgages approved in the three months to July was up 24% compared with a year ago.

However, the lender said that two major developments looked set to slow the rate of house price growth; namely, the increases in utility bills and higher mortgage rates. Variable rate mortgages will be more expensive, following the Bank of England’s decision to raise interest rates last month, to 4.75% from 4.5%. The Halifax added that the increase in fixed rate mortgages that had already occurred since the spring was also likely to dampen housing demand.

Some analysts are predicting a further rate rise before the end of the year.