House prices continued to rise last month, fuelled by low interest rates on borrowing and a shortage of properties coming onto the market.

According to the Halifax, house prices increased by 1.6% in September, the third monthly rise in a row and the fifth that the lender has recorded this year. Last week Nationwide reported a 0.9% rise in prices last month, triggering hopes of a more rapid market recovery.

However, economists predict that the recent rise in house prices is likely to slow towards the end of the year and into next.

House prices have risen by 1.7% since the end of last year, to an average of £163,533, and by 5.9% since April last year, when prices had plunged to a low of just £154,490.

The increase from July to September was 2.8%, the first quarterly rise for two years and the largest since the first quarter of 2007 (2.9%).

Martin Ellis, chief economist at Halifax, said: “The combination of increased demand and a low level of properties available for sale has pushed up house prices in recent months. The marked improvement in affordability due to the reduction in both property prices and interest rates since mid-2007 has been a key factor in stimulating higher demand.”

Although house prices are unlikely to fall as low as April’s figures, economists remain cautious about rises because of increased levels of unemployment and a lack of access to mortgage credit, especially for first-time buyers.

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