Property prices show 5.4pc rise as market picks up

The lender said prices rose 0.4 per cent in August, the seventh consecutive monthly increase, with the average house price now standing at £170,231.

Prices in the three months to August were 5.4 per cent higher than in the same three months in 2012, better than July’s 4.6 per cent increase, and the annual growth rate was the highest since June 2010.

The annual rate has picked up from 1.1 per cent in March, according to the Halifax’s monthly house price index.

Halifax housing economist Martin Ellis said a better economic outlook and Government schemes have helped to boost demand but activity is still being held back by the squeeze on household budgets.

“Overall, house prices are expected to rise gradually over the remainder of the year,” he said.

Halifax’s report follows similar findings from building society Nationwide last week that the market revival is gathering pace.

Lenders, surveyors, estate agents and property websites have all been reporting a strong pick-up in activity following the launch of Funding for Lending, which has prompted a big improvement in mortgage availability and rates.

Other initiatives such as NewBuy and Help to Buy have been aimed at giving people with smaller deposits a leg-up.

Bank of England governor Mark Carney recently addressed concerns that Government stimulus measures risk creating another property bubble.

He said the Bank was “acutely aware” of the potential threats and said action would be taken to clamp down on mortgage lending if needed.

Matthew Pointon, property economist at consultancy Capital Economics, said a short-term imbalance between demand and supply was driving price increases but rising wholesale interest rates may soon feed through to mortgage rates, dampening demand.

He added: “Mark Carney’s promise to use new tools to prevent a house price boom may help convince first-time buyers they don’t have to rush to buy now. And improved selling conditions should boost the number of homes for sale, taking some of the heat out of the market.”