The latest Halifax index released on Friday showed that residential property prices are up 4.3% year-on-year to £292,505, the strongest growth since late 2022.
The lender, which is owned by Lloyds Banking Group, said that buyers have been boosted after the Bank of England reduced interest rates at the beginning of August, in the first cut for four years.
The average price of a home is edging closer to the record reached in June 2022 when they hit £293,507.
But Halifax’s head of mortgages Amanda Bryden pointed out that while rising house prices is welcome news for existing homeowners, affordability remains a “significant challenge” for many potential buyers.
House prices rose by 0.3% in August, the Halifax said, compared to 0.9% in July.
Annual growth in prices has hit a near two-year high in each of the last two months, its data suggests.
Halifax’s figures only take into account buyers with mortgages and do not include those who purchase homes with cash or buy-to-let deals. Cash buyers account for around a third of housing sales.
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “Recent data has sent mixed messages about the state of the UK’s housing market, but today’s figures suggest we’re heading for an awesome autumn.
“Market activity has been quietly picking up over the summer, and economic indicators are starting to point in the right direction.
“Headline inflation seems to be holding steady just over the 2% target by the Bank of England. It is worth noting that affordability concerns remain, as not all households are seeing living costs come down.
“It will be interesting to see how high-street banks react to interest rates creeping down. They are guilty of being cautious when it comes to passing immediate changes onto the consumer, so it may be a while until we see lower borrowing costs and more mortgage offers return to the market.
“A structural undersupply of housing remains in many parts of the UK, which continues to provide some support for prices. The new government’s priority of building new homes would increase supply, but would not have any sudden impact on driving prices down.
“Many buyers see the autumn months as the time to make a move, with families in particular keen to be in their new home for Christmas. We expect to see house prices rise between now and the end of the year.”
Nicky Stevenson, MD at Fine & Country said: “House prices gained momentum in August, setting the stage for a potential Autumn boost.
“Property transactions in September are typically 12% higher than in August, a trend that looks likely to continue this year.
“Recent moves by the Bank of England to cut the base rate and predictions for another potential cut later in the year should further fuel market activity.
“Inflation also remains close to the government’s 2% target — although it is expected to rise slightly — helping to boost buyer confidence in 2024.
“With lower mortgage rates and easing financial pressures, more buyers are pulling the trigger on their moving plans. Meanwhile, more first-time buyers are stepping into the market after many were previously priced out by high repayment costs.
“While house prices are steadily rising, an increase in housing supply — up 14% year-on-year in August — should help control price inflation. The number of homes listed for sale is at a seven-year high, helping balance out rising demand.
“Possible tax increases in October’s budget may temper this momentum slightly, and affordability challenges continue to impact some buyers. Despite this, there is cautious optimism that the current strength of the property market will help it navigate these challenges and hopefully remain on a steady growth path.”
Foxtons CEO, Guy Gittins, noted: “The patience of UK home sellers is now being rewarded, as house prices are increasing consistently from one month to the next and at their fastest rate since 2002.
“This growth is being driven by an uplift in buyer activity and whilst this has been building since the start of the year, we’ve certainly seen it step up a gear since the general election.
“As a result, we’re seeing more enquiries and more offers made, with buyers also acting with greater confidence since interest rates were cut at the start of the month.
“All in all, the outlook remains a positive one for the remainder of the year and we expect a strong level of activity to persist as we move into autumn.”
Verona Frankish, CEO of Yopa, remarked: “The property market really picked up the pace in August with respect to the annual rate of house price growth seen and there’s no doubt that this improving market sentiment has been spurred by the first cut to interest rates since 2020.
“Buyers are proceeding with a renewed level of confidence and with further interest rate cuts expected before the year is out, we anticipate that market activity and house prices will continue to improve over the coming months.”
The director of Benham and Reeves, Marc von Grundherr, added: “House prices continue to climb on both a monthly and annual basis and so far, it’s been a very solid summer for the UK property market, with both buyer and seller activity levels continuing to improve.
“The monthly rate of house price growth did slow in August, but this was only to be expected given that it’s summer holiday season and the real proof in the pudding is the annual rate of growth, which was the strongest seen since the back end of 2022.”