Published on : Thu, 06 Oct 2005 17:24GMT
by : Andy Clarke

LONDON - House prices in Britain continued to be on an upswing recording a 1.2 percent rise in September as compared with the previous month's figures, the Halifax bank said today.

The annual rate of house price inflation scaled the 3 percent mark in September up from the 2.5 percent in August, making this an overall gain of 2 percent in the last three months. However this figure was still 'significantly lower' than the 20.5 percent posted in the third quarter of the previous year. The house prices rose by 1.8 percent in the third quarter of the current year.

Halifax, a part of the HBoS banking group was cautious in its outlook for the future since the annual rate of house price inflation is still below the mark. "Healthy household income growth and historically high levels of employment are supporting the housing market and the Bank of England's decision to cut interest rates in August also appears to have given the market a boost," said Martin Ellis, chief economist at Halifax. The sharply falling house prices over the last 15 months have given rise to the fear that there is bound to be a sharp correction in the near future.

"The reduction in economic growth this year and the continuing high level of house prices in relation to average earnings are expected to constrain housing demand and prevent a sustained surge in house prices," said Ellis. Halifax is recommending that customers take the advantage and fix-up two-year fixed mortgage rates. This implies that the lender is pretty sure that the Bank of England will not institute further rate cuts in the near future.

Even Howard Archer, chief UK economist at Global Insight was wary in predicting the future of the market, "The survey evidence generally suggests that more realistic pricing by sellers has been a significant factor in rising buyer interest and boosting housing market activity. If house prices start accelerating markedly again, we believe buyer interest will quickly wane," he said.