House prices rose by 0.4% in July — the largest monthly increase since January — with the average UK home now valued at £298,237, according to the latest Halifax House Price Index.

The monthly gain of £1,080 pushed annual growth to 2.4%, down slightly from June’s 2.7%.

While the data points to a housing market showing tentative signs of momentum, experts remain cautious about the months ahead as affordability remains stretched and economic uncertainty continues to weigh on buyer sentiment.

Amanda Bryden, head of mortgages at Halifax, said the market was displaying resilience, with activity levels holding up well. “While the national average remains close to a record high, it’s worth remembering that prices vary widely across the country depending on a number of factors, not least location and property type,” she said.

Bryden noted that affordability was “gradually improving”, supported by easing mortgage rates and continued wage growth, but acknowledged the challenges for those trying to move up or onto the property ladder. She added that more flexible affordability assessments were also helping to underpin market activity and forecast a path of “modest gains” for house prices through the remainder of the year.

COVID MORTGAGE MATURITIES

The data comes ahead of a wave of fixed-rate mortgage maturities in the second half of 2025, particularly among those who borrowed during the pandemic-era boom. Bryden said most borrowers coming off five-year deals would face higher monthly repayments, although many on two-year fixes taken out during the aftermath of the 2022 mini-budget may see their costs fall. While unlikely to have a significant direct impact on prices, this could alter market behaviour if households decide to delay moving plans.

Across the UK, Northern Ireland continued to outpace other regions with annual price growth of 9.3%, bringing the average home to £214,832. Scotland saw prices climb 4.7% to £215,238, while the average home in Wales now costs £227,928, up 2.7% year on year.

Among English regions, the North West and Yorkshire & the Humber led the way, each posting annual growth of 4.0%. London recorded only modest growth of 0.5%, with the average property now priced at £539,914 — still the highest in the UK.

LONDON WEAKNESSES

However, London’s apparent stability masks underlying weakness in some parts of the capital. Professor Joe Nellis, economic adviser at MHA and co-creator of the Halifax House Price Index, said: “Many properties in London, particularly inner London, are actually losing value. Families looking to invest in their first owned property are being forced out of the city by high property prices and the seemingly ever-increasing cost of living.”

He warned that demand in the capital had softened, not helped by the withdrawal of stamp duty relief for first-time buyers in April, and noted that while national price growth is likely to remain below 3% for 2025, regions like Northern Ireland and the North West were expected to outperform.

Still, Nellis suggested that any cut to the base rate by the Bank of England later this year could provide a modest lift to transactions and pricing, particularly if inflationary pressures ease.

Tomer Aboody, director at MT Finance, said buyers were “encouraged to transact” by lower mortgage rates and more realistic pricing from sellers. “Even though the national average house price is close to a record high, sellers are pricing more sensibly,” he added.

The affordability backdrop remains mixed. Thomas Lambert, financial planner at Quilter, noted that even minor increases in rates or prices could disqualify first-time buyers already stretched by high living costs. He highlighted recent rule changes from the Financial Conduct Authority that allow some borrowers to switch to cheaper mortgage products without full affordability checks, potentially offering welcome relief.

But he warned that such measures “won’t fix the bigger issue which is a lack of housing stock”, adding that the Treasury’s decision to make the mortgage guarantee scheme permanent pointed to the structural nature of the problem.

Jeremy Leaf, north London estate agent and former RICS residential chairman, said sellers were adjusting to market realities. “Buyers are still ruling the roost and negotiating hard,” he said. “The continuing excess of supply over demand is putting a stop to any strong price rebound.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the broader economic picture was “broadly stable” for home buyers, despite wage inflation slowing and unemployment beginning to rise. “Mortgage rates continue to edge downwards but it’s not just pricing that is improving,” he said, pointing to looser lender criteria around income multiples and requirements.