House prices 'marked improvement'

House prices are showing a "marked improvement" and are likely to remain stable during the second half of this year, a hew study has predicted.

Prices increased by 1% month-on-month in June and dropped by 0.5% year-on-year, but the annual change is a much less sharp drop than the falls seen a year ago, Halifax said.

Its latest study takes average house prices to £162,417, and Halifax suggested that some recent improvements in the employment market and low levels of mortgage payments by historic standards may have helped to keep prices up.

Halifax housing economist Martin Ellis said: "There has been a marked improvement in the annual rate of change over the past 12 months.

"A year ago, in May 2011, house prices were falling at an annual rate of 4.2%. In contrast, there has been broad stability recently with the annual rate between 0% and minus 0.5% in each of the past three months."

He added: "We expect little change in prices and sales over the remainder of the year provided that the UK's economic outlook does not deteriorate significantly."

The study said that prices have continued to fluctuate on a monthly basis, with an even number of falls and rises in the past 12 months. Lenders, including Halifax, have raised their mortgage rates for both new and existing borrowers in recent months, blaming the weak economy and the increased cost of funding a mortgage.

The Bank of England has also said it expects lenders generally to tighten their borrowing criteria in the coming months, making it tougher for people to get a mortgage, particularly those with lower deposits.

But Halifax's study said that mortgage payments for a new borrower remain "significantly" below the long-term average as a proportion of disposable earnings.

It said that mortgage payments for a new borrower, including first-time buyers and home movers, stood at around 26% of disposable earnings in the second quarter of this year, as the Bank of England maintains the base rate at a record low. This proportion is well below the average of 36% recorded over the past 27 years.