Values edge up but housing market still in the doldrums

House prices in the UK edged up in July supported by the record low interest rates, but remain under pressure as consumers face the economic headwinds of market turmoil, low wage growth and Government spending cuts.

The house price index published by Halifax reported a 0.3 per cent increase over the previous month, but was still 2.6 per cent lower than a year earlier as analysts said that the market remained "historically weakened".

The average price hit £163,981 in July, which still remains some way off the recent peak of £168,593 in April last year. It slid to a nadir of £160,393 a year later.

"The latest rise in house prices in July will be seen by some as a sign that the market has found a new equilibrium," said Samuel Tombs, an economist at Capital Economics.

"However, the increasingly downbeat news regarding the wider economy and the fact that house prices are still at historically high levels, mean it is likely to only be a matter of time before price falls return."

Analysts also warn that the current sell off in the financial markets could lead to mortgage lenders reining in the availability of home loans, which would have a further negative effect on the housing market.