UK house prices rose by 0.8% in July, and ongoing reductions in mortgage rates are likely to support continued growth throughout the rest of the year, according to Halifax.

The average house price in the UK in July was £291,268, up from £289,042 in June. This increase follows three months of minimal growth, with price rises ranging from 0.1% to 0.2%.

The annual growth rate climbed to 2.3%, the highest it has been since January this year.

Amanda Bryden, head of mortgages at Halifax, noted that the recent Bank of England base rate cut and the reduction in mortgage rates from major lenders were positive developments for prospective homebuyers.

She said: “With lower mortgage rates and the potential for further base rate reductions, we expect house prices to continue a modest upward trend throughout the rest of this year.”

Last week, the Bank of England reduced interest rates from 5.25% to 5%, marking the first cut in four and a half years. However, the Bank cautioned that savers should not expect more substantial cuts soon as it works to keep inflation in check.

Several major banks have recently lowered their mortgage rates.

Nathan Emerson, CEO at Propertymark, said: “It is extremely positive to see further growth within the housing sector, especially following what has been a tough time across the last few years for consumers.

“With inflation now down at targeted levels and with a very welcome cut in interest rates last week, Propertymark is extremely optimistic to see a real uplift across the housing sector over the coming months. 

“Assuming the economy remains stable in September, it would be good to see the central bank continue to gradually cut interest rates as conditions permit. It is a case of all eyes on the UK government regarding their housebuilding programme, as well as learning more regarding support for potential first-time buyers.” 

More reaction:

‘Mojo found’

Anthony Codling, managing director, equity research, RBC Capital Markets, said:

“UK house prices found their mojo again rising by on average £2,226 or 0.8% in July, and annual house price inflation at 2.3% is the highest it’s been so far this year, implying the value of the average house has increased by £6,650 over the last 12 months. 

“Labour is looking to get Britain building, but it also looks like it is also getting house prices moving. Last week we saw the first Bank rate cut, and we believe that mortgage rates will trend down over the coming months. If we throw into the mix wages rising and cost of living pressures easing, it looks likely that house prices will continue to rise.”

‘Pent-up demand’

Tom Bill, head of UK residential research at Knight Frank, said: 

“A number of buyers switched off early for summer due to the election, but that has created pent-up demand that will propel activity when the autumn market begins next month. 

“Demand will be further boosted by the recent rate cut and the prospect of another one this year, which we think will produce average UK house price growth of 3% in 2024.”

‘Hotting up’

Holly Tomlinson, financial planner at Quilter, said:

“Given that the Bank of England has cut its base rate from 5.25% to 5%, we may see the market start to heat up. Although the cut in rates will have a relatively minor impact on the amount people pay if they are on tracker mortgages or standard variable rate mortgages (SVR) and no impact if they are on a fixed rate, the change in rates does a lot for buyer and seller confidence.

“Similarly, the price of fixed-rate deals had largely already priced in a small cut to the base rate, so we have not seen a huge change in the cost of these deals.

“A feeling that rates are going in the right direction, though, will help many people decide to take the leap back into the market, pushing up demand for homes. Those on the fence about selling their home may also feel the time is now right.”