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The Halifax has added weight to reports that house prices have risen surprisingly strongly in recent months; its latest market analysis suggests that average house prices rose 0.8 per cent in August.  That pushed prices back to the level seen at the end of 2008, reversing the falls seen earlier this year.

It is the second month in a row on the Halifax index to record a rise in prices and the fourth increase in the last eight months.  Prices in the three months to August are 1.7 per cent higher than in the previous three months, the biggest increase since July 2007.  Nevertheless, prices remain 10.1 per cent lower than they were in August 2008.

Commenting, Martin Ellis, the Halifax housing economist, said: "Overall, house prices nationally are very similar to the level at the end of last year.  Demand for housing has increased since the start of the year due to better affordability and low interest rates.  This, together with low levels of property available for sale, has boosted house prices over the last few months."

The Halifax estimates that the proportion of disposable earnings devoted to mortgage payments - a key affordability measure - has fallen significantly over the past 21 months.  Nationally, typical mortgage payments for a new borrower have fallen from a peak of 48 per cent  of average disposable earnings in the autumn of 2007 to 29 per cent last month.  Notably, mortgage payments relative to earnings are now below the long-term average of 35 per cent recorded over the past 25 years.