UK house prices rise at fastest m/m rate since ’02

British house prices unexpectedly rose at their fastest monthly rate in 6-1/2 years in May, the Halifax house price survey showed on Thursday, but the mortgage lender cautioned that market conditions remained difficult.

The survey showed that house prices rose 2.6 percent in May, the biggest increase October 2002, but were still 13.6 percent down on the year.

Halifax said that in the three months to May prices fell 16.3 percent from a year ago, the slowest rate of decline since December.

Sterling rose around half a cent against the dollar after the figures, which were much stronger than analysts' forecasts of a monthly fall of 1 percent.

Halifax said that although there were some tentative signs of a stabilisation in the housing market, prices often rose on the month during a downturn.

"House sales remain substantially below their long term average and market conditions are expected to remain difficult, with housing activity continuing at low levels over the coming months," said Halifax economist Nitesh Patel.

Halifax said the average price of a home rose to 158,565 pounds.