(Reuters) - British house prices rose last month at their fastest pace since October, mortgage lender Halifax said on Wednesday, providing a glimmer of hope that downward price pressure may be abating.

The rise of 1.2 percent on the month confounded analysts' expectations for an unchanged reading but still left prices 3.5 percent lower in the three months to June compared with a year ago.
"Low interest rates, an increase in the number of people in employment and some tightening in market conditions earlier in the year are likely to have been the main factors behind the recent improvement in price trends," said Halifax housing economist Martin Ellis.

He added that sustained low interest rates should help to support the market over the coming months. UK interest rates have stood at a record low of 0.5 percent for more than two years and markets are not expecting any rise until 2012.

The Halifax figures were slightly more encouraging than data released from the Nationwide building society last week that showed house prices were flat in June.
However, analysts said low earning growth and tight household budgets would continue to provide headwinds, as would banks' reluctance to lend to all but the safest buyers.
"Despite the spike up in house prices in June reported by the Halifax, we retain the view that modest overall falls in house prices are more likely than not over the second half of 2011 and the first half of 2012," said Howard Archer at His Global Insight. (Reporting by Fiona Shaikh; Editing by Susan Fenton)

http://www.reuters.com/article/2011/07/06/britain-halifax-idUSL6E7I60SS20110706