UK consumers keep spending

January 8, 2002 Posted: 1237 GMT

LONDON (CNN) -- Soaring house prices and strong retail sales in the UK could put more pressure on the Bank of England to keep interest rates on hold.

Halifax, the UK's biggest mortgage lender, said on Tuesday that house prices jumped 2.9 percent in December, compared to a 2 percent rise in November.

The December increase was the biggest monthly rise in more than two years, Halifax said. On an annual basis, it said house prices were up 15.5 percent – the strongest rate since January 2000.

The Halifax numbers support a survey released last week by the

Nationwide Building Society showing house prices rose 13.9 percent in 2001 – making it the biggest annual rise in five years, according to the society's figures.

"Despite the terrible events of September 11 and the dramatic slowdown in the world economy the housing market has shown remarkable resilience," said Gary Styles, head of group economics at Halifax, told Reuters.

Meanwhile, British clothing retailer Next said on Tuesday its same store sales grew 9 percent for the 23-week period ended January 5.

"We beat our expectations in the run up to Christmas and this time last year we had particularly high stock levels leading to a bigger clearance," Next chief executive Simon Wolfson told Reuters.

"Certainly, the growth rate we've been seeing is well ahead of our long term growth rate for like-for-like sales, which is between 3 to 5 percent," he said. "We are planning for a return to more normal levels of growth going forward."

Next's strong Christmas performance follows a report last week by the Confederation of British Industry which showed UK retailers posted their best holiday shopping period in 14 years.

Both the housing and retail numbers are expected to put more pressure on the Bank of England to keep interest rates unchanged when its monetary policy committee meet this week.

With rates already at 37-year lows and inflation running at just 1.8 percent,  economists see little need for the BoE to continue easing rates.

The central bank reduced its key rate seven times in 2001. The last cut in November trimmed the rate to 4 percent.