British house prices climbed 1.2 per cent in September to push up the annual rate of increase to 3 per cent, according to the Halifax house price survey today.
The figures, the fourth straight monthly rise, took some analysts by surprise as they had expected a pullback in property prices following a 1.6 per cent gain in August that coincided with the Bank of England's first interest rate cut in more than two years.
The Bank of England is widely expected to leave interest rates on hold at 4.5 per cent for the second month running when it announces its latest decision at noon today.
It was the second month in a row that the three-month annual rate edged higher on the survey by Halifax, Britain's biggest mortgage lender. It hit a low of 2.3 per cent in the three months to July.
HBOS said the average house price of a house in September was a seasonally adjusted £168,299 ($246,718).
House price inflation is still sharply below the 20.5 per cent rate in September 2004. The Halifax survey showed high valuations and an uncertain economic outlook mean that a return to boom times is not on the cards.
"The reduction in economic growth this year and the continuing high level of house prices in relation to average earnings are expected to constrain housing demand and prevent a sustained surge in house prices," HBOS chief economist Martin Ellis said in the report.