House prices rise in summer as values ​​rise by £4,391 in a month to hit record highs, according to official data

House prices soared between July and August, according to the latest figures from the Office of National Statistics.

The average house increased in value by 1.5 percent monthly, from £288,533 in July to £292,924 in August, marking the second highest monthly increase in the past two years.

It marks the sixth month in a row that house prices have risen, meaning annual property inflation is at 2.8 percent.

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

House prices are rising at different levels in Britain and are also highly dependent on the type of property.

Much of the growth is driven by new construction prices, which are up 25.6 percent compared to this time last year.

However, the ONS warned that the number of transactions was lower than normal, which could have skewed the results. It also noted that there was ‘substantially greater uncertainty’ around new build prices.

Meanwhile, average home prices for existing and resold homes rose just 0.5 percent in August and 1.3 percent annually.

Price increases also vary widely at regional level.

In England, the average house count increased by 2.3 percent compared to last year; In Wales there has been an increase of 3.5 percent; in Scotland there has been an annual increase of 5.4 percent and in Northern Ireland house prices have risen by 6.4 percent.

Within England, the North West has seen the biggest house price increases, up 4.6 percent in the past twelve months.

However, the South West has seen little change, with prices up 0.8 per cent since August 2023.

Why are house prices rising?

Increased political certainty and lower mortgage rates are believed to be the cause, said Emily Williams, research director at Savills.

“The market has been boosted this summer by the reduction in mortgage costs and increased certainty in the wake of the general election,” Williams said.

‘The latest mortgage data from the Bank of England shows that monthly mortgage approvals have risen to their highest level since the 2023 mini budget.

“However, there is still the potential for more demand to be released, especially from home movers, as rates continue to fall.”

The ONS figures are widely regarded as the most comprehensive and accurate house price index. This is because this report from Britain’s official statisticians uses land registry data and is based on average sales prices. However, this also means that the data lags behind other indexes.

Jonathan Hopper, CEO of Garrington Property Finders, says the market has cooled somewhat since then.

‘The property market got off to a strong Starmer start. But budget uncertainty means the past few weeks have felt more like a Reeves retreat.

“While today’s official data shows the real estate market was heating up in August, things have cooled off since then,” Hopper said. “As impressive and welcome as these numbers are, they may be more of a blip than a boom.”

He added: ‘In recent weeks, price growth has returned to neutral in many areas. A rush of sellers putting their homes on the market means many buyers are left with little choice and can negotiate hard over the price they pay.

‘The slowdown in activity is most acute at the top end of the market, where many sales are discretionary.

‘Wealthy buyers have been spooked by reports of painful tax rises in this month’s budget, and some potential sellers have gone into early hibernation and decided not to put their homes on the market until spring.’

Mortgage interest rates are likely to rise again

It is true that mortgage rates have been falling at a significant pace since the summer.

Between early July and the end of last week, the cheapest available five-year fixed-rate mortgage fell from 4.28 percent to 3.68 percent.

Meanwhile, the lowest two-year interest rate in that period fell from 4.68 percent to 3.84 percent.

However, they are now creeping up again, with the lowest five-year fix at 3.79 percent and the lowest two-year fix at 3.9 percent.

NatWest has said it will increase mortgage rates, following the lead of Santander and TSB earlier this week.

Rise in rates: NatWest is the latest mortgage provider to change course and increase rates after months of cuts

More lenders are expected to raise rates in the coming weeks as the Sonia swap rate, an interbank rate, has moved higher in recent weeks.

When the Sonia swaps rise enough, this often results in a rise in the fixed mortgage rate, and vice versa when it falls.

Currently, brokers claim there is little to no margin for lenders to make money, which is why some have to price their deals higher.

Chris Sykes, technical manager at mortgage broker Private Finance, said: ‘For residential rates, we are seeing lenders increasing their fixed rates and expect this to continue as the price is likely to be below the Sonia swap rate at the moment.

‘The level of interest rate increases varies enormously per lender, ranging from 0.1 to 0.3 percent to considerably more.

“These larger interest rate increases are mainly coming from lenders who feel that they are far too competitive for the specialization they offer, or that their business volumes are too high and want to reduce demand.”