House prices in Britain jumped 1.1 percent in July and fell at their slowest annual rate in more than a year, mortgage lender Halifax said on Wednesday, as it halved its forecast for house price falls this year.
The lender said house prices in July were 9.9 percent down from a year ago, the smallest annual fall since June 2008 and a marked improvement from the 18.9 percent annual drop recorded in December.
Halifax parent Lloyds Banking Group said it now expected house prices to fall 7 percent or less this year, compared with an earlier forecast for a decline of 15 percent.
Wednesday's survey tallies with one by rival lender Nationwide which showed prices rose 1.3 percent on the month and fell at their slowest pace since last June and suggest the decline in housing market activity may be starting to level off.
It will also provide some food for thought to Bank of England policymakers, who start their two-day policy meeting today and will decide whether or not to expand their 125 billion pound asset purchase programme which ran out last week.
However, Halifax cautioned against reading too much into last month's rise in prices, warning that the housing market remained vulnerable.
"I wouldn't want to get too excited about the improvement this month because the housing market still faces considerable headwinds," Halifax economist Martin Ellis told Reuters.
"Unemployment is rising sharply and is expected to keep rising for some time and there's a shortage of mortgage credit available and I don't see that changing dramatically in the near term."
TIGHT CREDIT
Official data last week showed that while mortgage approvals rose in June to their highest since last April, new mortgage lending rose much less than expected and overall bank lending to households was its weakest in 15 years.
And with banks under pressure to curb their losses, lending is likely to be tight for a while yet.
Lloyds reported a 4 billion pound loss in the first-half of the year due to a surge in bad debts from the HBOS business it bought earlier this year.
Analysts said that a lack of credit was one of the major risks to any recovery in the housing market.
"Given still very tight credit conditions, poor economic fundamentals and the fact that affordability ratios are moving back up now, we suspect that house prices are highly likely to suffer relapses over the coming months," said Howard Archer, economist at Global Insight.
July's monthly increase in prices more than reversed June's upwardly-revised 0.4 percent fall and took the average price of a home to 159,623 pounds ($270,400).
Analysts had forecast a rise of 0.6 percent on the month, for a three-month annual decline of 12.3 percent.
