House prices rose at their highest rate for more than a year last month, with the average home increasing in value by almost £50 a day.
The Halifax bank, Britain's largest mortgage lender, reported yesterday that the price of property rose on average by 1.6 per cent, or £1,442, in June to £92,122. This took the annual rate of increase to 9.7 per cent, the strongest rise since May 2000. Prices have risen by more than 1 per cent in four of the last five months.
The figures mirror the results of other surveys, which suggest the emergence of a mini-boom since the Bank of England began cutting interest rates in February.
"The renewed buoyancy in house prices in the past few months has been stimulated by the recent series of mortgage rate cuts," Halifax said. "The continuing decline in unemployment and the healthy state of the household sector's finances have also supported housing demand."
The report said the prospects for the market for the rest of the year were "positive", as low interest rates made property affordable despite high prices. But it warned that growth in house prices would slow as the pace of economic growth started to deteriorate.
Halifax said prices had risen 5 per cent in the three months to June. If this were sustained it would translate into an annual rate of 20 per cent, an echo of the boom and bust of the 1980s. The Bank of England expressed concern last week about the market, saying homebuyers might be taking on "more debt than was prudent".
Further evidence of the buoyancy of the market was delivered yesterday when Kensington, a company that specialises in lending to more high-risk customers, reported a 50 per cent surge in profits over the six months to May.
Analysts in the City said the Halifax figures, which followed a report from Nationwide building society showing a 1.9 per cent rise in June, had eliminated any hope of a cut in rates by the Bank later today. All but one of 30 economists polled by Reuters last week forecast that the Bank's monetary policy committee would leave rates unchanged.
Michael Hume, a UK economist at the City investment bank Lehman Brothers said there was little sign of a cooling in the housing market.
"The US economy is stabilising and there is sure to be a kick to the UK economy as the effect of foot-and-mouth disease washes out," he said.