Uk house prices jump most in 12 years

UK house prices rose at the fastest monthly pace in almost 12 years and to the highest level since before the global credit crisis in May, a survey showed Thursday, as demand for homes continues to outpace supply despite tougher new mortgage rules.

Mortgage lender Halifax said the value of homes purchased by its own mortgage customers hit £184,464 ($332,543) in May, the highest price since April 2008. That marks a 3.9 per cent increase from April -- the largest monthly gain since October 2002 -- and an annual gain of 8.7 per cent.

"Housing demand is still strong and continues to be supported by a strengthening economic recovery," said Stephen Noakes, mortgage director at Halifax. "Consumer confidence is being boosted by a rapidly improving labour market and low interest rates, although growth in average earnings still remains weak."

The increase follows news earlier in the week from one of the UK's other mortgage lenders Nationwide, that its house price index hit a record high in May.

Reports that house prices are continuing to surge will likely be a key discussion among Bank of England officials at a financial policy meeting later this month.

In April the Mortgage Market Review rules came into effect with lenders having to adhere to new stricter lending rules.

There have been some signs that the new rules may have slowed mortgage lending a little as figures from the BoE Monday showed mortgage approvals slipped for a third straight month in April. However, the appetite for property in the UK remains undiminished and those who are able, are continuing to pay the price required to buy a home in the UK.

Halifax's Mr Noakes noted there are signs that house building efforts are being stepped up that should help to "curb upward pressure on prices over the medium and longer term."

Indeed, the latest construction purchasing managers index showed house building continued to grow in May, while house building firms have in recent weeks all reported healthy orders and profits.

And, as Queen Elizabeth II opened Parliament Wednesday, her speech included a reference to the new garden cities that are to be built in the UK. Ebbsfleet in Kent, south east England is the first of the new cities which will be developed, starting with an initial 15,000 homes.