House prices unexpectedly rose at their fastest monthly rate in six-and-the-half years in May, the Halifax house price survey showed yesteday, but the mortgage lender cautioned that market conditions remained difficult.

The survey showed that house prices rose 2.6 per cent in May, the biggest increase October 2002, but were still 13.6 per cent down on the year.

Halifax said that in the three months to May prices fell 16.3 per cent from a year ago, the slowest rate of decline since December.

The pound rose around half a cent against the dollar after the figures, which were much stronger than analysts' forecasts of a monthly fall of one per cent.

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