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LONDON, Oct 6 (Reuters) - House prices in Britain rose 1.6 percent in September -- more than twice as fast as expected -- leaving prices down 7.4 percent in the three months to September versus a year ago, mortgage lender Halifax said on Tuesday.
Halifax said that price rises had been caused by limited supply in the face of increased demand driven by improved affordability.
((For a graphic comparing the Halifax and Nationwide house price indices, click here: http://r.reuters.com/vef32f))
Prices are now up 5.6 percent from their April low point on Halifax's measure, but at an average of 163,533 pounds ($260,400) are still no higher than in mid-2005.
"The recent revival in house prices is a consequence of sharply reduced mortgage interest rates and more affordable prices due to the substantial fall in house prices from their 2007 peak levels through to the early months of this year," said Howard Archer, chief UK economist at IHS Global Insight.
"It is also clear that house prices have been supported supported appreciably in recent months by a lack of new properties coming on to the market," Archer added.
Analysts had forecast a rise 0.6 percent, for a three-month annual fall of 7.8 percent. Year-on-year, house prices are 4.8 percent lower.
Halifax did not expect prices to keep rising at the same monthly pace.
Continuing increases in unemployment and low earnings growth are likely to constrain the rise in demand," said Martin Ellis, Halifax housing economist.
"There are also some signs that the improvement in market conditions is encouraging more people to put their properties up for sale. This development could loosen market conditions by alleviating the current shortage of supply," Ellis added.

(Reporting by David Milliken) ($1=.6279 Pound) Keywords: BRITAIN PROPERTY/HALIFAX

(Reuters Messaging: david.milliken.reuters.com@reuters.net; david.milliken@reuters.com; +44 20 7542 5109)

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