HOUSE prices rose at their fastest annual rate in more than a year last month, according to figures from Halifax released yesterday.

The strength of the figures from the nation’s biggest mortgage lender were seen as sweeping away any lingering doubts that the Bank of England will raise interest rates today by another quarter point.

Halifax’s survey showed that house prices jumped by a further 1.3 per cent in July, after a June gain of 1.2 per cent, taking the annual rate of house price inflation to 22.1 per cent.

Deeply entrenched City expectations that the Bank will raise rates today, for the fifth time since November, were hardened by new survey data confirming that the services sector is continuing to expand strongly.

But mixed messages from yesterday’s numbers, and other recent data, emphasised the tough task faced by the Bank’s Monetary Policy Committee (MPC) in deciding how far, and how fast, to raise base rates.

Although Halifax reported another month of steep house price gains, it joined City analysts in arguing that July’s 1.3 per cent rise was weaker than average increases of 2 per cent or more over the past six months — suggesting some cooling in the market.

Economists also pointed to other tentative signs of a housing market slowdown.

Yesterday’s CIPS/Reuters survey of services also offered mixed signals. Its headline index of activity fell for a third month in a row to the weakest level in more than a year. But, despite this, analysts noted that activity remains at historically high levels, consistent with services growth of more than 3.5 per cent.

Economists said the conflicting indications from recent data suggested that the Bank’s four previous rate increases are beginning to bite. But the MPC is unlikely to be deterred from pressing on with a rate rise today, or from signalling that more are to come, as it focuses on the recent strength of growth, which rose to 0.9 per cent in the second quarter.

The Bank is, though, expected to continue to move gradually as it tries to ensure a “soft landing” for the economy.