House prices up 1.1% in July

House prices increased by 1.1% in July, according to the Halifax House Price Index. This was the second increase in the last three months and the third in the first seven months of 2009.

Prices in the three months to July compared to the previous three months - an indicator of the underlying trend - were 0.8% higher. This slight increase was the first rise on this quarterly basis since October 2007.

Prices fell by 0.8% over the first seven months of 2009. The average house price in July was £159,623 compared to £160,861 in December 2008.

House prices in July were 12.1% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) improved for the third consecutive month and has eased from -17.7% in April.

The house price to earnings ratio - a key affordability measure - has declined from a peak of 5.84 in July 2007 to an estimated 4.36 in July 2009. The long-term average is 4.0.

Further signs of an improvement in housing market activity, but less than half the level in mid 2007. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase - a leading indicator of completed house sales - increased by 22% between the first and second quarters of 2009, on a seasonally adjusted basis. Approvals increased for the fifth successive month in June and were 35% higher than in June 2008, but were nonetheless 58% lower than in June 2007.

Lower interest rates have reduced mortgage payments. Monthly repayments accounted for an estimated 21.4% of average gross household income in July 2009 for existing mortgage borrowers. This compares with a peak of 26.9% in October 2008 and is the lowest proportion of income devoted to mortgage repayments since mid 2004. The long-term average for income accounted for by mortgage repayments is 20.4%.

Commenting, Martin Ellis, housing economist, said: "There was a 1.1% increase in the average UK house price in July. This was the second rise in the past three months and prices in the three months to July were 0.8% higher than in the previous three months. So far this year, house prices have fallen by less than 1%.

Demand for homes has risen, albeit from a very low base, since the start of the year, driven by improvements in affordability and low interest rates. Higher demand has combined with the low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months."