House prices increased by 0.1% in June, according to the Halifax today. Overall, UK house prices have been static in the first six months of 2005. As expected, the annual rate of house price inflation continues to slow, falling to 3.7% in June: the lowest since March 2001.

Halifax all houses, all buyers index (1983=100) Index (seasonally adjusted) 526.3 Monthly Change 0.1% Annual Change 3.7% Standardised Average Price (seasonally adjusted) £162,605

This month annual house price growth fell below annual average earnings growth (currently 4.6%) for the first time since early 2001. Earnings are expected to continue to outpace house prices during the second half of 2005, causing the house price: earnings ratio to decline from its current level of 5.5 and, therefore, somewhat easing the affordability difficulties faced by first-time buyers.

Regionally, the biggest house price rises in the second quarter of 2005 were in Wales (4.2%) and Northern Ireland (3.9%).

As previously forecast by Halifax, there were house price falls in some English regions: for example, East Anglia (-1.6%), the South East (-1.2%) and Greater London (-1.1%). These modest falls should, however, be viewed in the context of the substantial house price rises in all these regions over the past 10 years. Prices have risen by 207% in London, 180% in the South East and 174% in East Anglia since 1995 Quarter 2.

The differential between the average price in the south and its equivalent in the north has narrowed by £10,000 over the past year with prices in the south £80,000 higher than in the north in 2005 Quarter 2. The gap is at its narrowest since the last quarter of 2001.

The economic fundamentals underpinning the housing market are sound. Earnings growth is robust. The UK economy continues to grow with employment reaching another record high of 28.58 million people employed. Mortgage payments are very close to their long-term historical average as a proportion of income for new borrowers.

Housing market activity has stabilised with some signs of improvement in recent months. The number of loans approved for house purchase increased for the fifth successive month in May and Halifax Estate Agents have seen a steady level of sales since February.