Inflation stays steady

House prices increased by 0.4% in June, according to the latest figures from the Halifax. This is the second monthly increase below 0.5%, said the mortgage lender, indicating that a gradual slowdown seems likely for the rest of the year. The report says prices rose 2% in the second quarter of 2007, down from an increase of 3% in the first quarter and the 4.2% increase in the final quarter of 2006. Prices did increase in most regions, with the most dramatic rises taking place in London (4.9%) and Northern Ireland (8.5%). There were modest declines in the South West, West Midlands and Wales but, as the report notes, these slight falls need to be seen in the light of substantial prices increases in all these areas in recent months. Martin Ellis, Chief Economist at the Halifax said: ?These figures indicate that house price inflation is slowing. The increases in mortgage rates and the persistence of negative real earnings growth in the early months of 2007 are expected to cause annual house price inflation to slow further over the coming months .Solid economic fundamentals and a shortage of housing supply will, nonetheless, continue to support house prices.? Kelvin Davidson from economists Capital Economics said the report was evidence of the delayed impact of interest rate rises from last August: ?The volatility of the quarter-on-quarter profile of regional house prices means that a rebound cannot be ruled out. And we doubt that we will see significant further falls this year. But we have always argued that it would take some time for the rate rises that have been seen since last August to take effect on house prices. The latest regional price falls are consistent with the softer market conditions that we expect.?