Housing price rises reach late 1980s level

HOUSE PRICES rose by 2.8 per cent last month, in their biggest monthly increase since the1980s boom. The leap took the annual rate of house price inflation up to 10.8 per cent from 8.8 per cent in September.

The figures, released by the Halifax, Britain's biggest mortgage lender, will fuel fears that interest rates will rise again when the Bank of England's Monetary Policy Committee (MPC) meets on Thursday.

Fresh buoyancy in the housing market and other indicators, such as higher pay deals, suggest that the economy is building up inflationary pressure. And the jump followed a month in which prices fell, according to the figures, but the Halifax insisted that the pace of increase was not as sharp as it had been in early summer.

The next six months would see a slowdown, its report added, explaining: "Base rates are likely to rise over coming months as the Bank of England seeks to cool the pace of economic growth."

October's rise was, however, the biggest monthly leap since three successive, similar increases in July, August and September 1988.

David Miles, Professor of Economics at Imperial College in London, said: "The worrying thing for the Bank of England would be if people developed unrealistic expectations about house prices started to borrow. But there is no sign yet that it is fuelling a boom."