House prices accelerate further

House prices accelerated again in May, making them 20 per cent higher than a year ago.

09:18 08 June 2004

House prices accelerated again in May, making them 20 per cent higher than a year ago.

The Halifax House Price Index has shown that prices rose 2.2 per cent in May alone, meaning the average house price in the UK now stands at 157,849.

In April prices rose 1.8 per cent, meaning in May prices were rising 22.2 per cent faster than in the previous month.

Prices in the north of England and Wales rose fastest, and look set to keep climbing for the rest of the year. In southern England the housing market is increasing again - following a "significant slowdown" in 2003.

The Halifax said a strong economy and fewer new homes were behind the continued price growth.

There were three per cent fewer private sector new houses finished in the first three months of 2004, compared with the same period in 2003.

Despite the continued increases, Halifax believe the speed at which prices are increasing will slow later on in the year as interest rates increase and the number of first time buyers dwindles.

"Higher interest rates and the increasing difficulties that face aspiring first-time buyers should, however, exert downward pressure on house inflation later in the year and into 2005," Martin Ellis, Halifax chief economist said.

"We will have to wait a few months to assess whether this represents the start of a slowdown in the level of housing market activity," Halifax said.

The Bank of England is currently meeting today to decide whether to increase interest rates. Their decision is due on Thursday.