THE Halifax, Britain's biggest building society, is lifting its

mortgage rate from 7.64% to 8.10% in the wake of last Monday's

half-point rise to 5.75% in the bank base rate which, the society

argues, was unnecessary.

The Abbey National bank and the Nationwide building society announced

last week that they were increasing their rates, the former by 0.35% to

8.09%, the latter by 0.4% to 8.14%.

The changes come into effect immediately for new borrowers and from

October 1 for existing borrowers. The new rates for Halifax savers

rather than borrowers will ''follow in due course''.

Along with other major building societies, including the Nationwide,

the Halifax has said the housing market was still in a fragile state and

that talk of interest rate increases, let alone an actual rise, could

damage recovery. It has also said that it did not believe an increase

was necessary.

However, Gary Marsh, head of group corporate affairs at the Halifax,

said yesterday he did not think the increase -- about #13 a month on a

#50,000 mortgage -- would have much effect on the housing market which

would remain flat this year.

Even so, he repeated the warning that continued speculation on further

increases in interest rates would have a damaging effect on confidence

in the housing market. And the Halifax is clearly unrepentent about its

view that a rise was not needed anyway.

''We see no real justification for last week's rise in the base rate,

and we certainly see no need for any future increases,'' said Mr Marsh.

He pointed out that there was no sign of inflation in the housing

market and suggested that all the other inflation indicators in the

economy were consistently coming in better than expected so there should

be no real reason for further increases.

The Halifax's view is at variance with a number of City economists who

believe rates will have to rise again next year, if not before the end

of the current year.

This year, the recovery has been led by industry and exports not

consumers, though clearly consumer confidence has to be a factor over

any reasonable period of time.

At the moment, it still seems to be lacking, particularly in relation

to the housing market and last week's retail sales figure for August

showed a slowdown in High Street spending.