London effect lifts average home price

Prices rose by 0.8 per cent in July compared with the previous month to reach £162,900, which is also an annual increase of 0.3 per cent, the latest report showed.

But a 6.5 per cent annual increase in London, taking average prices to £367,785, helped to mask the drops in many other regions.

Prices fell year on year by 2.5 per cent in Yorkshire and the Humber, by 1.3 per cent in Wales, by 0.8 per cent in the West Midlands, by 1.9 per cent in the South West and 3.8 per cent in the North East.

The North West recorded the biggest year-on-year fall, with a 3.9 per cent decrease taking typical prices to £109,235.

The remaining regions which did see prices increase annually saw much more modest rises than those recorded in London, which has had strong interest from overseas buyers. Prices rose year on year by 0.4 per cent in the East Midlands, by 0.7 per cent in the South East and by 0.8 per cent in the East.

A report from property analyst Hometrack published earlier this week said that prices are expected to remain under downward pressure for the rest of the year as growth in the number of homes for sale outstrips potential buyers.

Lenders have also been tightening their borrowing criteria and several have recently announced increases to their mortgage rates.

Nationwide pushed up some mortgage rates for new borrowers yesterday and Santander has plans to increase its standard variable rate, which will see a few hundred thousand of its customers’ mortgage payments go up.

The Bank of England and the Treasury launched a “funding for lending” scheme to unclog the credit, although analysts have seen little evidence that this has increased the availability of mortgages for people with lower deposits.