UK house prices hit two-year high as market recovers from Truss mini-budget

UK house prices hit a two-year high last month, in the latest sign that the property market has recovered from the aftermath of Liz Truss’s infamous mini-budget that sent borrowing costs soaring, according to the latest figures from Halifax.

The lender said the cost of an average house increased by 0.3% last month, after rising 0.9% in July, pushing the average cost of a property to £292,505.

This is the highest level since August 2022, the month before Truss’s disastrous mini-budget .

Related: Manchester named top hotspot for first-time buyers in Halifax study

On an annual basis, house prices were up 4.3% in August, the strongest rate since November 2022, which Halifax said largely reflected weaker prices a year ago.

“Recent price rises build on a largely positive summer for the UK housing market,” said Amanda Bryden, the head of mortgages at Halifax. “Prospective homebuyers are feeling more confident thanks to easing interest rates. Such has been the resilience of house prices that the average property is now just £1,000 shy of the record high set in June 2022.”

However, Bryden added that affordability remained a “significant challenge” for many new potential homebuyers.

Separate figures from the Bank of England showed there were almost 62,000 mortgages approved for homebuyers in July, the highest total since September 2022.

The UK housing market has been buoyed up by the Bank’s move this month to reduce interest rates from 5.25% to 5% , the first cut in four and a half years. Lenders have responded to the cut by introducing more competitive mortgage rates, while Lloyds Bank, Britain’s biggest mortgage provider, announced last month that it would increase the maximum sum it was willing to lend to first-time buyers.

Under the £2bn initiative, which experts say will bring home ownership within the reach of more prospective buyers, the Lloyds and Halifax chains will allow new buyers to take out loans worth up to 5.5 times their household annual income – up from 4.49 times.

“It is always encouraging to see enhanced levels of consumer confidence within the housing market, and we now appear to be firmly following a positive trend of growth once again,” said Nathan Emerson, the chief executive of Propertymark. “It is reassuring to witness the market moving forward from what has been a very fluid few years, where household affordability has been at near breaking point for many people.”

Last month, Halifax forecast that UK house prices would continue to grow throughout the rest of this year , as mortgage rates began to drop after the cut in interest rates.

The latest survey figures show that Northern Ireland continues to show the strongest property price growth of any nation or region, rising 9.8% on an annual basis in August. The average property price of a property in Northern Ireland is now £201,043.

Wales recorded 5.5% annual growth last month, with a typical home costing on average £224,433.

In England, the north-west reported the strongest annual growth at 4% in August, with an average home costing £232,917.

London continues to have the most expensive property prices in the UK, at an average of £536,056, an annual increase of 1.5% in August compared with last year.

“One small reduction in interest rates has translated into an instant response from the housing market during what is usually one of the quietest months of the year,” said Amy Reynolds, the head of sales at the estate agent Antony Roberts in Richmond, London.

Separately on Friday, the UK housebuilder Berkeley said trading was stable between 1 May 2024 and 31 August – the first four months of its current financial year.

Berkeley said it was confident it would hit its profit targets, and welcomed the new government’s drive to speed up housebuilding.

The company told the City: “Berkeley supports the proposed changes to the planning system and the government’s aspiration to deliver 1.5m new homes across this parliament as part of its mission for growth.

“Achieving this ambition requires a change of attitude and a refreshed partnership approach to allow developments, that are currently stalled, to come forward, and Berkeley is committed to playing its full part in delivering the new homes the country needs.”