British house prices rose in January, reversing a December decline, data showed today, but analysts still expect the market to cool later in 2007 as higher interest rates make it harder for people to buy property.
House prices rose 1.3 per cent in January, according to the Halifax house price index, erasing a 0.9 per cent fall in December.
The three-month annual rate of inflation held at 9.9 per cent, the index from Britain's largest mortgage provider showed.
But analysts cautioned against reading too much into one month's data, given that other indicators have shown signs of an easing in the housing market in an environment of rising borrowing costs and stretched affordability.
The Bank of England has raised interest rates by 75 basis points in the last six months, and economists said there had already been some early signs that was starting to cool housing demand.
Several housing market indicators have weakened in the last month, and official data showed mortgage approvals - a good indicator of house prices six months ahead - fell to an eight-month low in December.
"If the December and January Halifax data are taken together, it could be seen as a sign that house prices could be beginning to come off the boil," said Howard Archer, an economist at Global Insight.
And with a further rise in interest rates looking ever more likely, housing demand will almost certainly cool further as the year progresses. Economists do not expect the central bank to lift borrowing costs again today after last month's surprise hike, but many see another rise by the summer.