House prices in the UK reached a two-year high in August and the recent interest rate cut has increased confidence among homebuyers, the UK’s largest mortgage lender has said.
Halifax said prices last month were up 4.3% compared to last year, taking the average cost of a UK property to £292,505.
The lender, which is owned by Lloyds Banking Group, said that buyers have been boosted after the Bank of England reduced interest rates at the beginning of August, in the first cut for four years.
House prices are now “just shy” of the record reached in June 2022 when they hit £293,507.
But Halifax’s head of mortgages Amanda Bryden, said: “While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs.”
Despite a cut in UK interest rates, at 5% they remain at their highest since 2008 when the economy was on the cusp of the global financial crisis and some major banks faced collapse.
House prices rose by 0.3% in August, said Halifax, compared to 0.9% in July.
The Bank of England is forecast to cut interest rates again this year though it is not clear when. The Bank’s next meeting is on Thursday, 19 September.
Ms Bryden said: “With market activity picking up and the possibility of further interest rate reductions to come, we expect house prices to continue their modest growth through the remainder of this year.”