A survey has shown that British house prices jumped sharply in July, lifting the annual rate of increase to its highest in a year. The Nationwide building society said the cost of an average British home rose 0.8% last month after a 0.3% gain in June.
That took prices 5.9% higher than a year earlier compared with a 5% annual increase in June. This was the highest since April 2005 when the market was slowing after double-digit rates of growth in previous years.
But an interest rate cut one year ago helped revive sentiment and there has been growing evidence that the housing market is enjoying a new lease of life, boosting the case for a rise in borrowing costs in the months ahead.
Most economists expect the Bank of England to leave interest rates at 4.5% on Thursday, but the chance of a hike appears greater than at any time in the last year.
Meanwhile, separate figures showed that British manufacturing activity slowed more than expected last month as firms' costs rose at their fastest pace since the start of 2005.
The Chartered Institute of Purchasing and Supply/RBS Purchasing Managers' Index (PMI) fell to 53.8 in July from a downwardly-revised 55 in June.
That was lower than the 54.5 predicted by analysts but still above the 50-mark separating growth from decline and as such the figures are unlikely to alter expectations that the next move in Bank of England interest rates will be up.
