Annual house price growth in the UK has jumped to its highest rate since May 2003, according to the latest UK House Price Index published by the Office for National Statistics (ONS).

Average house prices increased by 15.5% in the year to July, a figure up significantly from 7.8% in June.

The jump in the annual rate is largely because of a base effect from the falls in prices seen this time last year, as a result of changes to the housing market’s stamp duty holiday.

According to the ONS data, the average UK house price increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months last year. It took the average UK house price to £292,000 in July 2022, a level that is now £39,000 higher than the same time last year.

Average house prices increased over the year by 16.4% in England to £312,000, 17.6% in Wales to £220,000, 9.9% in Scotland to £193,000, and 9.6% in Northern Ireland to £169,000.

“The July data has been skewed by the stamp duty holiday so needs to be taken with a pinch of salt,” commented managing director at Coreco, Andrew Montlake.

“The reality is that the property market has been slowly cooling in recent months as the nation is gripped by an unprecedented cost of living crisis. We're also seeing valuers start to get more conservative due to the strong economic headwinds. With more rate rises a nailed-on certainty and the cost of living crisis set to worsen as we enter the winter, the property market will likely see modest price growth between now and the spring.

“Higher mortgage rates and the immense pressure on household finances are also likely to result in demand dropping off in the months ahead. As ever, though, the lack of supply will support prices and prevent a pronounced fall.”

CEO at Loan.co.uk, Paul McGerrigan, added: “Whilst there is still evidence of strong demand, and supply issues with fewer properties coming up for sale, there are some early indications that the market is beginning to cool, but only time will tell in these unprecedented times.

“The rental market remains strong, driven by the fact certain parts of the population cannot get on to the property ladder. High demand for rental properties ensures the buy-to-let market continues to fly, helping to drive prices ever upward.

“What this all points to is an increased segmentation of the market between people who are heavily impacted by the cost of living crisis and those who are not. We watch with interest to see what the government does next in the property space with regards to taxation.

“As ever mortgage advisers need to proactively engage clients, to ensure they make the right borrowing decisions at this critical time in the market.”

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