House prices rise at 18% a year

PROPERTY prices rose another 1.6% in February as two recent interest rate rises failed to take the heat out of the market, figures showed today.

Halifax, Britain's biggest mortgage lender, said the year-on-year increase now stood at almost 18%, up from 16% in January and 15.4% in December. The average price of a home is now £148,089.

The latest surge in prices came despite action from the Bank of England to raise the cost of borrowing in November and February, lifting mortgage payments as a percentage of earnings from 13.9% to 15.5%.

Today's figures come a week after the Nationwide said the price of an average property moved 3.1% higher in February following a 0.7% increase in January.

The two sets of figures will add pressure on the Bank's Monetary Policy Committee (MPC) to consider another rise in rates at its latest two-day meeting, which started today.

Halifax put the continued strength of the housing market down to a healthy labour market and low interest rates, which are still near to record levels.

At the same time, the level of housebuilding remains low compared with previous decades and is failing to keep pace with the projected rise in the number of households over the next 20 years.

Halifax also said the growth in house prices had led to a 'significant increase' in the number of properties potentially subject to inheritance tax.

The number of properties valued at more than the current threshold of £255,000 is thought to have increased by 390,000 to 1.94 million, with more than two-thirds of the rise in areas outside London and the South East.

The average first-time buyer also pays more than £1,000 in stamp duty, equivalent to about two weeks of their annual income, said Halifax. In 1993, the typical first-time buyer paid no stamp duty.