Average house prices in the UK rose further in July, according to official figures released today.

The average house price rose to £218,479 in July, up from £214,222 in June, data released by the Department for Communities and Local Government (DCLG) shows.

Rising property prices pushed the annual rate of house price inflation up from 12.1 per cent to 12.4 per cent over the period – its highest level since March 2005.

Jumping property prices in London and the south-east drove the overall rise in house price growth, with the annual rate of inflation running at 19.1 per cent in the capital.

In the south-east annual house price growth stood at 11.9 per cent in July, while property prices in the south-west increased by 11.3 per cent over the year.

The lowest rate of house price growth was recorded in the north-west, West Midlands and East Midlands.

Officials said that rising house prices between June and July were driven by increases in average prices for detached homes, which climbed by 2.4 per cent over the month, bungalows (2.1 per cent), terraced houses (2.0 per cent) and flats and semi-detached houses (1.7 per cent each).

However analysts stressed that the figures applied to the period before the recent turmoil on the world's financial markets, which has been caused as a result of rising default levels in the US sub-prime mortgage market.

Traders fear that the crisis could lead to a credit crunch if banks become more unwilling to lend cash to consumers, due to losses they have made as a result of exposure to risky investments in the sub-prime sector.

Simon Rubinsohn, chief economist for the Royal Institution of Chartered Surveyors (Rics) said: "Even without a material round of job losses in the financial services industry, which is an increasing risk, we would expect house price inflation to slow sharply over the coming months as access to mortgage finance is disrupted particularly for higher risk borrowers."

Today's DCLG figures lag behind house price surveys issued by the UK's major lenders because the information is based on sale completions.

Last week the Halifax released data showing that house prices rose by a further 0.4 per cent in August, but the home loan provider also warned of a forthcoming slowdown in the market as past interest rate rises start to bite.

On Thursday the Bank of England opted to keep the UK's benchmark interest rate on hold at 5.75 per cent, for the second month in a row, but monetary policymakers had been raising the cost of borrowing prior to the turmoil on the world's financial markets.
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