House prices in Britain have come back to the boil in July to mark their biggest year-on-year gains since May 2003 and reinforce expectations for an interest rate rise next week.
The Nationwide Building Society said today house prices soared 2.1 per centin July, the biggest monthly gain since February, and were up a hefty 20.3 per centcompared with a year earlier.
The figures, which defied expectations of a slowdown, are sure to be of concern to the BoE, which is keen to cool house price inflation gradually with interest rate rises given the potential damage that a crash could do to the economy.
The data are likely to cement even further already solid expectations for a quarter-point hike in the base rate to 4.75 per cent next week after four such rises since November.
"This is a big increase," said Mr Ross Walker, an economist at RBS Financial Markets. "It's a signal that we are going to need more rate rises and the next one is going to come next week."
The sudden gains in July followed a month of slower - but still strong - growth in June and some tentative evidence from other surveys that the housing market may have finally begun responding to higher interest rates. But Nationwide flatly said that was not the case.
Mortgage lending hit a record last month since comparable records began in 1997, according to data published this week from the British Bankers' Association.
Figures from the Bank of England today showed that Britons have piled up over £1 trillion in debt - partly due to ever-larger mortgages to finance soaring house prices.