UK house prices push higher - Halifax

According to the latest Halifax House Price Index, house prices increased by 0.4% last month, compared to fall of 0.1% in July. A typical house now costs an average of £294,260, a fresh record.

The annual pace of growth eased from 11.8% to 11.5%, however, the lowest level in three months.

Kim Kinnaird, director at Halifax Mortgages, called August’s increase "relatively modest", noting that monthly house price inflation has averaged at around 0.9% over the last year.

She continued: "While house prices have so far proved resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity."

Interest rates have risen six times since December, to 1.75%, as the Bank of England looks to tackle surging inflation, currently at a 40-year high of 10.1%. Energy bills have also rocketed, with the price cap due to jump again, by 80%, next month.

Kinnaird added: "With house price to income affordability rations already historically high, a more challenging period for house prices should be expected.

"However, this should be viewed in the context of the exceptional growth witnessed in recent years, with average house prices having increased more than £30,000 over the last 12 months alone."

Tom Bill, head of UK residential research at Knight Frank, said: “The supply of houses tightened over the summer, as more took a summer holiday for the first time in three years, which kept prices buoyant.

“We expect more properties to be listed in the coming weeks, as we move from a seller’s towards a buyer’s market. Together with rising mortgage rates, this will increase downwards pressure on prices after they have appeared to defy gravity for so long.”

Sarah Coles, senior person finance analyst at Hargreaves Lansdown, said: “The property market is looking relatively rosy, but that’s largely because we’re looking the rear view mirror.

“Now the cost of living crisis has hit home, and while we may not be forced to face the full impact of rises in energy prices, we’re still having to cope with rampant inflation cross the board. At a time of rising rates and higher house prices, this is going to push property out of reach for desperate buyers.”

Martin Beck, chief economic advisor to the EY Item Club, said: “House prices are unlikely to defy the economy’s wider problems indefinitely. Mortgages are getting increasingly expensive, with the average interest rate on a new home loan reaching 2.34% in July, a six-year high. And with household incomes experiencing the biggest real-terms squeeze in decades, those with mortgages face challenges from higher outgoings and reduced spending power.

“However, the prospect of a cap on household energy bills should improve the outlook on both counts.”

New prime minister Liz Truss is widely expected to unveil a package of measures this week intended to tackle the energy crisis, including potentially capping bills.