LONDON, (Reuters) - British house prices had their biggest monthly jump in more than 11 years in May, figures from mortgage lender Halifax showed on Thursday, putting further pressure on the Bank of England to guard against risky lending.
House prices leapt by 3.9 percent, their biggest one-month rise since October 2002 and far outstripping forecasts of a rise of 0.7 percent after two months of falls.
The news came shortly before the Bank of England held benchmark interest rates at a record low 0.5 percent, and contrasts with recent figures showing a falling number of mortgage approvals, which typically heralds slower price increases.
While the central bank has, for now, ruled out raising rates to curb rising house prices, its Financial Policy Committee is widely expected to recommend a further tightening in mortgage lending standards after it meets later this month.
"Expectations of house price gains are still elevated, and the FPC should act to prevent any further loosening of mortgage terms," said Matthew Pointon, property economist at consultancy Capital Economics.
Halifax said house prices in the three months to May were 8.7 percent higher than a year earlier, matching March's rate of growth, which was the fastest since September 2007, though less than the 11.1 percent rise reported by rival lender Nationwide.
It also noted that the number of home sales was falling, and that this was making monthly price changes more volatile.
STEADY UPWARD TREND
Over the three months to May, prices were 2.0 percent higher, in line with the trend that has been in place since June last year.
"Housing demand is still strong and continues to be supported by a strengthening economic recovery," said Stephen Noakes, Halifax's mortgages director, adding that low interest rates and falling unemployment were boosting consumer morale.
However, weak wage growth and a revival in private-sector housebuilding - which was up by a third in the year to March - might temper price rises in the longer term, Noakes said.
House prices stand at almost five times average full-time male earnings, a level last exceeded in mid-2008, Halifax said.
Data on Wednesday showed that the average person taking out a mortgage was buying a house worth more than four times his or her annual earnings.
Lloyds Banking Group (LLOY.L), Halifax's parent company, said last month that it would not lend more than 500,000 pounds ($837,700) at multiples greater than four times earnings, and this week Royal Bank of Scotland (RBS.L) followed suit.
In late April, regulators required lenders to make closer checks of potential borrowers' spending patterns and to check they could afford mortgage payments if interest rates rose.
The BoE's Financial Policy Committee holds a quarterly meeting later this month, and economists say it could recommend other lenders adopt similar measures or hold more capital against high loan-to-value and loan-to-income mortgages.
(Reporting by David Milliken; editing by Michael Holden, John Stonestreet)