House prices in the UK hit a two-year high in August, with a 4.3% increase from the previous year, according to Halifax, the UK’s largest mortgage lender. This has brought the average property cost to £292,505.

The rise in prices follows the Bank of England’s recent interest rate cut, which has improved confidence among homebuyers. This was the first rate cut in four years, and it has positively impacted the housing market.

Currently, house prices are approaching the peak seen in June 2022, when they reached £293,507.

Amanda Bryden, head of mortgages at Halifax, commented on the current market conditions: “While the recent increase in house prices is good news for existing homeowners, many potential buyers still face significant challenges. Affordability remains a major concern for those adjusting to the higher mortgage costs that have been prevalent.”

She added that despite the recent reduction in UK interest rates, which have now been cut for the first time in four years, the rates still stand at 5%. This rate is the highest it has been since 2008, a period marked by severe economic uncertainty and the beginning of the global financial crisis, when several major banks were on the brink of collapse.

Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that while there has been some improvement in home loan deals following the recent rate cut—specifically, the average two-year fixed rate mortgage has decreased from 5.77% to 5.54%—the change has not been dramatic. 

The Bank of England is expected to make further interest rate cuts later this year, although the exact timing remains uncertain. The next meeting of the Bank’s monetary policy committee is scheduled for Thursday, 19 September. 

Amanda Bryden from Halifax commented that with increased market activity and the potential for more rate reductions, house prices are likely to continue their gradual rise for the rest of the year.

According to Halifax, house prices increased by 0.3% in August, a slowdown from the 0.9% rise seen in July. The annual growth rate for prices has reached a near two-year high for the past two months. However, Halifax attributed this rise more to the low property prices from the previous year rather than any significant current strength in the market.

First-time buyers may benefit from a period of more stable prices as they monitor deposit requirements and mortgage rates closely. In Northern Ireland, house prices have surged by 9.8% over the past year, bringing the average price to £201,043. Meanwhile, in England, the north west experienced the most significant increase, with prices rising by 4% to £232,917.

It is important to note that Halifax’s figures reflect only buyers who use mortgages and do not account for cash or buy-to-let purchases, which make up around a third of all property transactions. Nationwide also reported modest increases in property prices for August, both monthly and annually.

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