Flat house prices bear down on rates

The Bank of England's monetary policy committee, due to report on Monday, has come under further pressure to leave interest rates unchanged after it emerged that house prices were flat during April and have barely moved since January.

The Halifax monthly house price index, published yesterday, shows the average house in April sold for £163,615 - up only £23 on the March figure. Overall, the index shows that house prices are £1,200 higher than they were last December, but 7.8% higher than achieved in April 2004.

Martin Ellis, the bank's chief economist, said the figures provide further evidence that activity levels are stabilising following a sharp downturn in the second half of last year.

"We appear to be entering a period of broad stability, particularly in terms of market activity. Sound fundamentals, particularly in the shape of the ongoing strength of the labour market and the low level of in terest rates, should continue to underpin the market," he said.

Mr Ellis's predictions are backed up by the latest Bank of England figures that show the number of loans approved for house purchase increased for the second successive month in March. They rose 5.8%, up from 86,000 in February to 91,000 in March. However, the number of approved loans remains 26% lower than it was a year ago.

The Royal Institution of Chartered Surveyors detected a firming in activity in the first quarter of 2005, with newly agreed sales showing little change in March, a pattern confirmed by Halifax Estate Agents.

The institution said Labour's re-election would have little short-term effect but warned longer term tax rises may have implications. "Possible tax rises at a time of only moderate growth will restrain increases in disposable income and limitdemand."