House prices in the UK have jumped annually by 2.4% in August, following a year-on-year increase of 2.1% in July, Nationwide has revealed.

The building society’s house price index showed that this is the fastest pace of annual growth since December 2022, with the average house price now standing at £265,375.

However, month-on-month, UK house prices dropped by 0.2% in August, after a monthly increase of 0.3% in July.

Chief economist at Nationwide, Robert Gardner, said: "While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging).

"Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth."

In line with decarbonising the UK housing stock to meet 2050 emissions targets, Nationwide has included energy efficiency ratings from energy performance certificates (EPCs) alongside the usual property characteristics in its index.

Its analysis suggested that a more energy efficient property, rated A or B, attracts a premium of 2.8% compared to a similar property rated D.

It added that there was a noticeable discount for properties rated F or G, with a home rated in these brackets valued at 4.2% lower than a similar D rated property.

Despite the month-in-month fall in August, analysts have said this drop in activity is normal for the month, with improvements expected for the rest of the year.

Head of personal finance at Hargreaves Lansdown, Sarah Coles, added: "In August, people are always more interested in packing suitcases than boxes, so buyers tend to be thin on the ground. A slower market this month meant prices fell very slightly. However, they’re still positive over the year, and the market can expect a reasonable September, thanks to small improvements in affordability.

"These changes are only fractional, so don’t expect a property-buying bonanza. However, with every month that wages outpace house price growth, it makes it easier for people to borrow what they need. Meanwhile, mortgage rates haven’t shifted far but they have edged down.

"At the end of June, the average two-year fixed rate was 5.99% and it’s now 5.58%. And with one or two Bank of England rate cuts still expected during the rest of the year, you can expect that gradual drift southwards to continue. Lower mortgage rates will eventually persuade buyers off the fence and into estate agencies."

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