UK house prices rise at fastest pace since 2010
Britain's Chancellor of the Exchequer George Osborne meets Rick Newton and Emily Sandercock, who have recently bought an apartment at a development of new homes in south London.

Britain's house prices have risen by their fastest annual pace in around three years, according to a survey by mortgage lender Halifax.

In another sign that the British economy is recovering, prices in the three months to July rose 4.6%, compared to a year ago, beating expectations.

Prices also rose 0.9% in July, a sixth successive monthly increase.

Halifax forecasted that house prices across the UK will continue to rise gradually through 2013.

"Signs of improvement in the economy, underlined by the recent evidence of a rise in gross domestic product in the second quarter and increases in employment, appear to have boosted consumer confidence. Greater confidence is likely to have underpinned the increase in housing demand," Martin Ellis, Halifax's chief economist said in a statement.

"Official schemes, such as the Funding for Lending Scheme and the Help to Buy equity loan scheme, may also be raising demand. House prices are expected to continue to rise gradually through this year with only modest economic growth and still falling real earnings constraining housing demand and activity."

Government Schemes Help House Prices Soar

Two schemes are supporting the flow of credit in the consumer mortgage market, Help to Buy and Funding for Lending (FLS).

Under Help to Buy, homebuyers are offered an interest-free equity loan of as much as 20% of the property value to help bring down the cost of a deposit. A second part of the scheme, launching in 2014, will offer a government guarantee to banks giving out consumer mortgages.

FLS sees the Bank of England offer British banks discount-rate loans tied to the value of their stock lending to the real economy. As this lending grows, so does the amount of cheap money banks can access. It has so far incentivised the increased availability and affordability of consumer mortgages as banks look to grow their lending and tap FLS.

Last week, mortgage lender Nationawide revealed that UK home prices rose by its fastest pace in three years in July, following strengthened buyer sentiment. A wider economic recovery and the improvement in the jobs market has boosted buyers sentiments, Nationwide noted.

Halifax and Nationwide cited the FLS for boosting the property markets as the programme helps to reduce mortgage rates.

Constrained Supply

Halifax warned that the housing market remained in short supply.

'The increase in sales over the past year has not been matched by higher supply with the stock of unsold properties on the market lower than it was a year ago,' it said.

'The resulting tightening in market conditions has probably contributed to the modest upward pressure on house prices. Surveyors have, however, reported an overall increase in the number of homeowners providing instructions to sell in the last few months, which could help to bring demand and supply into better balance.'