House price inflation rising, says Halifax

Halifax bank said the average price of a house rose by 1.2 per cent in November after a flat reading in October, meaning prices have risen by more than 1.0 per cent in three out of the past four months. It took the annual rate of house price inflation to 4.5 per cent, its highest since May, although it was well below the 16.8 per cent seen a year ago.

Martin Ellis, Halifax's chief economist, said: "The high level of employment and good earnings growth continues to underpin housing demand."

The report is the latest to show that the housing market appears to be stabilising rather than heading for a crash, although Halifax was quick to dampen down talk of a new price boom. "The slowdown in economic growth over the past year and the historically high level of house prices relative to average earnings are expected to curb the recent improvement in housing demand," Mr Ellis said.

Money market rates, which are seen as a pointer to interest rates, rose slightly after analysts said the increase was faster than expected. Earlier this week, Nationwide building society posted zero growth for November.

Analysts in the City said yesterday's report would support the Bank of England's decisions to keep rates on hold but would not be enough to prevent them from raising the base rate unless evidence of a consumer upturn became overwhelming.

John Butler, UK economist at HSBC, said: "We're unlikely to see a rate cut at the beginning of next year while there are signs that consumer spending is past the worst and inflation is above target."