House-price inflation hits lowest rate for 15 months

The pace at which house prices are rising has more than halved in seven months, the latest survey from the high-street mortgage bank Halifax shows.

The pace at which house prices are rising has more than halved in seven months, the latest survey from the high-street mortgage bank Halifax shows.

The annual rate of house-price inflation slowed in August to 7.4 per cent from 8 per cent in July, its lowest level since June 1999 and a dramatic change from a peak of 16 per cent in January, Halifax said yesterday.

Two of Britain's largest housebuilders also said that there were signs of an end to the North-South divide in the housing market.

The continued slowing came despite a 0.5 per cent rise in prices between July and August, the second monthly rise in a row. Martin Ellis, the chief economist for the Halifax, said: "These rises suggest the housing market has steadied following four falls in the preceding five months. Given that the economic background is supportive and there's nothing in the fundamentals of the economy to say we are about to see a recession, I don't think the housing market is about to crash."

The Nationwide building society reported on Monday a 0.6 per cent fall in house-price inflation last month to take its estimate of the annual rate to 11.2 from 13.9 per cent.

Housing market experts said prices would continue to rise this year and next but at a much slower rate than witnessed in the recent mini-boom.

George Buckley, an economist at Deutsche Bank in London, said the average of the Halifax and Nationwide indices - now 9.2 per cent - would fall to 8.5 per cent by the end of this year and 6 per cent at the end of 2001. But with mortgage rates historically low, employment at a 10-year high and consumer confidence still buoyant, he said the economic outlook was "housing friendly".

Stewart Robertson, an economist with Lombard Street Research, an independent analyst, forecast a fall in house price inflation to 5 or 6 per cent by the end of the year. "The market is stabilising," he said.

That view was supported yesterday by two of Britain's biggest housebuilders, both reporting profit rises for the first half of the year. Taylor Woodrow, whose profits doubled to £89.4m, said rises in the South-east outside London had slowed to 6 or 7 per cent from 20 per cent, compared with 5 per cent in the North and Scotland. George Wimpey, with profits up 72 per cent to £48m, said the market had cooled since March. The chief executive, Dennis Brant, said: "This has been particularly noticeable in the South-east."