U.K. house prices rose the most in four months in July as record-low interest rates and the economic recovery boosted demand for homes, Halifax said. The average cost of a home increased 0.6 percent to 167,425 pounds ($266,540), reversing a decline in June, the mortgage lending division of Lloyds Banking Group Plc said in an e-mailed statement today. From a year earlier, prices rose 4.6 percent. “House prices will be broadly unchanged over 2010 as a whole,” Martin Ellis, an economist at Halifax, said in the statement. “Low interest rates and a recovering economy, however, are underpinning demand and continue to support the market.” Britain’s economy almost quadrupled its pace of growth in the second quarter, cementing the recovery, while low interest rates are making it cheaper for homeowners to cover their mortgage costs. The Bank of England will tomorrow keep its benchmark rate at a record low of 0.5 percent, according to a survey of economists. To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

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