Prices Grow Despite Rate Rise

House prices rose by 1% in September, bringing the average cost of a property nationally to £181,186, according to the latest Halifax report. The figure proves that the Bank of England?s decision to increase the interest rate by 0.25% in August didn?t affect the market as the expected. The annual rate of house price inflation, however, is down year on year to 8%, 0.2% lower than it was in August, Halifax found. Regionally, the picture looks very uniform, with all English regions experiencing annual price gains of between 5.5% and 8.5%, the narrowest range ever recorded by Halifax. The stand-out performers nationally were Northern Ireland, which has recorded rises of 30% in the past twelve months, and Scotland, which is still performing strongly with an average increase of 14.5%. London saw an easing of inflation, from 10.9% in Quarter 2 to 8.5% in Quarter 3, which could indicate the reopening of the north/south divide, which had previously been narrowing for almost four years. Martin Ellis, Halifax Chief Economist, said he expects a healthy housing market in coming months with a gradual easing of house price inflation: ?House prices rose by 1% in September, but the annual rate has eased for the third successive month, to the lowest rate since April 2006,? he said. ?We expect increased utility bills and higher interest rates to curb housing demand over the coming months, causing annual house price inflation to ease between now and the end of the year.? Property Economists Capital Economics (CE) said today that the rate increase may yet have an effect on prices, and we need to wait at least until November to know: ?We believe that the lags between taking the decision to purchase a house and actually completing the deal mean that the impact of August?s rate increase cannot be properly assessed for at least another month,? said Kelvin Davidson of CE. ?However, today?s data certainly do nothing to dispel the argument that the housing market has been largely immune to higher base rates. Indeed it looks quite possible that the Halifax index could end 2006 at around 7-8% yoy,? although his report also warned that another rate increase could lead to a slower start for 2007.