Soaring UK house price inflation is showing the first signs of cooling down, according to the Halifax.

House price growth has gradually eased over the last three months

Gary Styles, Halifax chief economist

The giant mortgage lender said house prices rose at an annual rate of 18.8% in August, compared with 20.8% in July.

Average earnings have failed to keep pace with house prices over the last 12 months, the Halifax said.

However there is no sign of a lack of buyers.

The number of housing transactions so far in 2002 was about 10% higher than in the same period last year, the Halifax said.

Still buoyant

The ratio of house prices to average earnings has risen to 4.2 times.

This is up 0.6 on the same period last year, though the ratio remains well below the record peak of 5 times average earnings.

"The UK housing market has been very strong in 2002 but house price growth has gradually eased over the last three months", said Gary Styles, Halifax's chief economist.

"Indicators of housing market activity whilst confirming a buoyant marketplace also show some early signs of slowing," he added.

UK house prices rose by 0.2% in August, compared to steeper monthly rises of 1.8% in July and 2.4% in June.

The Halifax's survey echoes recent findings by the Royal Institution of Chartered Surveyors, which showed slower housing demand and some increase in the supply of properties for sale in July.

More lending

However, the Halifax's findings are at odds with those of another big lender, the Nationwide.

Its survey last week found that prices rose 2.5% between July and August, giving an annual increase of 22.7% - the strongest rate since 1989, Nationwide said.

Gross mortgage advances rose to an all time high in July, according to the Halifax.

Total gross advances reached �19bn in July, more than 40% higher than in 2001.

The average price of a home is now �111,968, the Halifax said.