UPDATE:UK Halifax Jul YY House Price Fall Smallest In 11 Mos

LONDON -- U.K. house prices rose for the second time in three months in July, while the annual decline continued to ease, showing the smallest drop in almost a year, lender Lloyds Banking Group said Wednesday.

According to HBOS, now owned by Lloyds, the Halifax house price index in July rose 1.1% from June and was 12.1% lower than a year earlier. The annual fall was last smaller in August 2008 when prices fell 10.9%. The July data compares with a 0.5% month-on-month fall and a drop of 15.0% on the year in June.

Economists surveyed by Dow Jones Newswires had forecast the index would rise 1.0% on the month and fall 12.2% on the year.

"So far this year, house prices have fallen less than 1%," said Martin Ellis, Halifax's housing economist. "Higher demand has combined with the low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months," he said.

According to the Halifax house price index, average U.K. house prices are now at similar levels seen in mid-2004 which has improved affordability for home buyers. That, combined with lower interest rates, has revived the ailing housing market in recent months and will likely continue to do so.

The Bank of England said last week that the forward-looking measure of mortgage approvals rose to a 14-month high in June to a total of 47,584. That was the fifth straight month of gains in approvals, which suggests that the current wave of more upbeat house-market indicators will continue.

However, economists warn that a pickup in the market does not represent a return to the years of soaring house prices seen up to 2007.

"The significant rise in house prices in July reported by both the Halifax and the Nationwide - following on from other increases - will obviously fuel speculation that the housing market has turned decisively," said Howard Archer, chief U.K. and European economist for Global Insight IHS.

"While it is very possible that April marked the trough in house prices on the Halifax measure, we suspect that they will be prone to relapses over the coming months and we certainly do not think that a sharp sustained upward trend in house prices is in the process of developing," he said.