House prices have increased at their most rapid pace in nearly two years, according to industry reports, suggesting that optimism regarding potential interest rate cuts is impacting the property market.
In August, the Halifax house price index showed that the average home value rose by 4.3% compared to the same month last year, marking the most significant increase since November 2022.
This rise comes on the heels of a 0.3% increase in August and a 0.9% rise in July, pushing the average home price to £292,505, the highest in two years.
The average house price is now just £1,000 below the record high reached in June 2022.
Amanda Bryden, head of mortgages at Halifax, commented, “The recent price increases reflect a generally positive summer for the UK housing market. Prospective homebuyers are more confident thanks to the easing of interest rates. This renewed confidence is evident in the surge in mortgage approvals, now at their highest level in almost two years.”
Additionally, separate data from Nationwide last week showed that house prices had risen at their fastest annual rate since December 2022 as of August.
Economists predict that house prices will increase by about 5% next year.
The 0.3% rise in house prices from July to August was stronger than many economists had anticipated, suggesting that the market will gain renewed momentum next year.
This follows a 0.9% increase from June to July, which was revised upward from an initial estimate of 0.8%.
In contrast, the Nationwide index showed a 0.2% decline between July and August, but economists view the Halifax data as indicating that the drop was merely a temporary setback and not the beginning of a new downturn.
Ashley Webb, a UK Economist at Capital Economics, noted, “Overall, today’s data release reinforces our belief that the housing market is not on the brink of a new downturn. While we don’t foresee significant price rises this year, we anticipate that a reduction in the Bank Rate from the current 5% to 3% will lead to lower mortgage rates, bolster demand, and provide house prices with renewed momentum next year, potentially resulting in a 5% increase in 2025.”
