House prices in the UK rose by the most in six months in July when they increased by a slightly faster than expected 0.4% from June, according to figures from mortgage lender Halifax that add to signs of a stabilisation in the housing market.
Economists had expected prices to rise by 0.3% in month-on-month terms after a 0.1% gain in June.
Halifax said on Thursday house prices were 2.4% higher compared with July last year, slowing from June's 2.7% increase.
The housing market has settled after a rush to beat the expiry in April of a tax break for some home buyers which depressed sales immediately after the deadline.
Amanda Bryden, Head of Mortgages, Halifax, said: “While the national average remains close to a record high, it’s worth remembering that prices vary widely across the country depending on a number of factors, not least location and property type.
“Challenges remain for those looking to move up or onto the property ladder. But with mortgage rates continuing to ease and wages still rising, the picture on affordability is gradually improving. Combined with the more flexible affordability assessments now in place, the result is a housing market that continues to show resilience, with activity levels holding up well.
“The second half of this year will also see a notable rise in homeowners coming to the end of fixed-rate deals taken out during the pandemic-era property boom; a period marked by ultra-low interest rates and soaring house prices.
"While most borrowers coming to the end of five-year fixed-rate mortgage deals will see their monthly repayments rise, the extent of this will vary across households. Those coming off a two year fixed-rate are very likely to see their monthly payments come down, as they originally locked in rates during the peak that followed the 2022 mini-budget.
"We’re unlikely to see a significant impact on house prices, but it may influence market dynamics if prospective home movers choose to delay plans as a result of tighter budgets.”
Ranald Mitchell, Director at Charwin Mortgages, said the property market is “not booming, not busting, just quietly adjusting".
He added: "July’s rise is the strongest this year, but annual growth is cooling and the market remains patchy. Falling mortgage rates and rising wages are helping, but the real test comes as fixed deals end. Some will see payments drop, others will feel the squeeze. It’s a resilient market, but don’t expect fireworks, just a slow, steady reset”.
The Bank of England is widely expected to cut its main interest rate to 4% from 4.25% later on Thursday but the outlook for further reductions in borrowing costs is unclear due to persistent inflation pressures, even as the jobs market cools.
Rival lender Nationwide said last week its measure of house prices rose by 0.6% in July compared with June.
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