House prices climb 2% in a month despite six interest rate rises

The jump in prices pushed annual house price inflation up to 12.4% for the year to the end of July, its highest level since March 2005.

It is the third month in a row that the annual rate of growth has increased, leaving the average home in the UK worth £218,479.

The figures from the Department of Communities and Local Government go against growing evidence from other house price indexes that the property market has peaked following six interest rate rises during the past year.

Last week Britain's biggest mortgage lender Halifax said property prices rose by only 0.4 per cent during August, while Nationwide Building Society said they increased by 0.6 per cent.

Howard Archer, chief UK and European economist at Global Insight, said: "The DCLG data indicates that the housing market is proving resilient to higher interest rates.

"However, it must be borne in mind that the DCLG tends to provide lagging evidence on house prices, as the office calculates its index at the time when mortgages are completed.

"Furthermore, the DCLG data is for July, and there is data and survey evidence available for August, including from the Nationwide and Halifax, which suggest overall that house prices have peaked, although they are still relatively robust."

He said he expected house price growth to slow gradually and erratically during the coming months, before settling down into an extended period of very modest rises.

The DCLG figures showed that all types of property experienced strong gains during the month, with detached homes leading the way with a jump of 2.4 per cent, while the price of bungalows rose by an average of 2.1 per cent, terrace house prices increased by 2 per cent and the cost of flats and semi-detached homes rose by 1.7 per cent.

Across the regions, Northern Ireland continued to see the strongest annual house price gains, with the cost of homes there soaring by 46.8 per cent in the year to the end of July, although the rate had slowed slightly from 55.9 per cent the previous month.

Elsewhere, London and the South continued to lead the way, with annual house price inflation in the capital jumping to 19.1 per cent, up from 17.5 per cent in June, while it rose to 11.9 per cent in the South East and 11.3 per cent in the South West.

But although the annual rate of growth rose slightly to 8.5 per cent in the North East, in other northern regions it slowed, with the North West seeing a drop to 7.6 per cent and in Yorkshire and Humberside it eased to 8.4 per cent.

The gains in the North East pushed the average cost of a home past the £150,000 barrier for the first time to average £151,064, meaning there is now no region in the UK where the average property costs less than £150,000.

Strong price rises in Northern Ireland now mean it is the third most expensive place in the UK to buy a home behind London and the South East, with prices in the region averaging £242,391.

Buyers getting on to the property ladder across the whole of the UK are now paying an average of £167,314 for their first home, 13.2 per cent more than they paid last year.