Official figures show house prices are enjoying a summer boom – with house values ​​rising by £4,391 in a month, hitting a record high

According to the latest data from the Office for National Statistics, house prices rose between July and August.

The value of the average house increased by 1.5 per cent a month from £288,533 in July to £292,924 in August, the second highest monthly increase in the last two years.

This is the sixth consecutive month of rising home values, meaning annual housing inflation remains at 2.8%.

The figure also shows a clear distance from the previous peak, reached in late summer 2022, when prices hovered around £288,500 for several months before falling to £277,782 in March 2023.

House prices in the UK are rising at different rates and depend largely on the type of property.

The main reason for the increase are the prices of new buildings, which are 25.6% higher than last year at this time.

However, the ONS warned that the number of transactions was lower than usual, which could have skewed the results. He also noted that there was “significantly greater uncertainty” about new building prices.

Meanwhile, average home prices for existing and sold properties rose only 0.5% in August and 1.3% annually.

At the regional level, price increases also vary significantly.

In England, the average home is up 2.3% on last year; In Wales there was a jump of 3.5 per cent; in Scotland an increase of 5.4 per cent a year and in Northern Ireland house values ​​increased by 6.4 per cent.

The biggest increase in house prices in England has been in the North West, up 4.6% in the last 12 months.

However, the South West saw little change, with prices increasing by 0.8 percent from August 2023.

Why are house prices rising?

According to Emily Williams, research director at Savills, the reason is greater political certainty and lower mortgage rates.

“The market was revitalized over the summer by lower mortgage costs and increased certainty in the wake of the general election,” Williams said.

“The latest mortgage data from the Bank of England showed monthly mortgage approvals rose to their highest level since the 2023 mini-budget.

“Still, there is scope for more demand to be unleashed, particularly from home movers, as rates continue to decline.”

ONS data is widely seen as the most comprehensive and accurate indicator of house prices. This is because this report by UK Official Statisticians uses land registry data and is based on average selling prices. However, this also means that its data lags behind other indexes.

Jonathan Hopper, chief executive of Garrington Property Finders, says the market has cooled off a bit since then.

“The real estate market has had a strong start for Starmer. But Budget uncertainty means recent weeks have felt more like a Reeves retreat.

“Although today's official data shows that the August property market recovered quite nicely, the situation has since calmed down,” Hopper said. “While these numbers are impressive and welcome, they may be more sudden than boom.”

He added: “In recent weeks, price dynamics have returned to neutral levels in many areas. The influx of sellers putting their homes on the market means many buyers have plenty of choice and are able to negotiate hard on the price they pay.

“The slowdown in business is most severe at the top end of the market, where many sales are discretionary.

“Wealthy buyers were spooked by reports of painful tax increases expected in this month's budget, and some potential sellers went into an early winter hibernation and decided to hold off on listing their home until spring.”

Mortgage rates will rise again

It is true that mortgage rates have been falling at a fairly rapid rate since the summer.

From the beginning of July to the end of last week, the cheapest available five-year fixed-rate mortgage fell from 4.28 percent. up to 3.68 percent

Meanwhile, the lowest two-year rate dropped from 4.68% to 3.84% during that time.

However, they are now starting to rise again, reaching a five-year low of 3.79% and a two-year low of 3.9%.

NatWest said it was raising mortgage rates following Santander and TSB earlier this week.

Interest rate hike: NatWest is the latest mortgage lender to change its mind and raise interest rates after months of cuts

More lenders are expected to raise interest rates in the coming weeks as Sonia swap rates – the rate on interbank lending – have risen in recent weeks.

When Sonia swaps rise appropriately, it often results in an increase in fixed mortgage interest rates and vice versa when they fall.

Brokers now argue that lenders have little or no margin to make money, so some are forced to reprice their deals at a higher amount.

Chris Sykes, technical manager at mortgage broker Private Finance, said: “In residential rates we have started to see lenders increasing their fixed rates and we expect this trend to continue as they are now likely to be pricing them below Sonia swap rates.

“The level of rate increases varies significantly between lenders, ranging from 0.1-0.3 percent to much higher.

“These larger interest rate increases are mainly coming from lenders who feel they are too competitive for the specialty they offer or whose business volume is too large and want to reduce demand.”