Average house price soars

The average price of a home in Britain has smashed through the £150,000 barrier for the first time, in the latest sign that the property market is in the grip of a spring boom.

Figures today from Halifax show house prices rose by 2.2 per cent on average to £151,467 last month. That meant property values rocketed 6.2 per cent in the first quarter to stand

18.5 per cent higher than a year ago.

The findings, which back other reports indicating the market has taken off again after a lull last year, will reinforce speculation the Bank of England will raise interest rates next week.

Halifax said prices were rising most rapidly in the North, with London and the South-East lagging behind. Homeownersin the North-West enjoyed the biggest gains in the first quarter, with prices shooting up by 9.7 per cent.

In contrast, prices rose by 2.8 per cent in London and 3.7 per cent in the South-East. Despite the narrowing in the North-South divide, prices in London remain significantly higher than any other area at an average of £239,552, highlighting the problems first-time buyers face in the capital.

Halifax chief economist Martin Ellis said: "Strong demand and tight supply conditions continue to drive house prices up. Prices are rising in the South, but have done so at a much more modest pace over the past year. This has led to a narrowing in the North-South divide and we expect this trend to continue during the remainder of 2004."

Mortgage rival Nationwide this week upped its house-price inflation forecast for this year to 15 per cent. Today Halifax said it was sticking to its eight per cent prediction. While the number of properties sold has risen, the stock on estate agents' books has fallen, putting upward pressure on prices.

Today's report will fuel fears of a housing price collapse, as experts warn that the higher prices rise, the greater the risk of a crash. The Bank of England's monetary policy committee meets on Wednesday and Thursday-of next week to set interest rates. With the traditional Easter homebuying spree just around the corner, some experts predict the cost of borrowing will be raised to prick the house-price bubble before it inflates further.

The committee last lifted rates, to four per cent, in February but the move has had no impact so far.

Alan Castle, economist at investment bank Lehman Brothers, said: "The strength of house prices, mortgage lending and equity withdrawal will undoubtedly be a concern for the Bank. But we still judge the appreciation of sterling will stay the MPC's hand next week." The City expects rates to have climbed to 4.75 per cent by the end of the year.