The pace of the housing market drove prices up to the highest level in three years, according to reports from mortgage lender Halifax.
House prices increased in July by 0.9% up from 3.7% in the three months to June, spurred on by six consecutive monthly house price rises.
The average house price in July was £169,624.
The lack of new home building in the UK coupled with the shortage of properties coming to market contributed to the rise in house prices, said Halifax.
The improving economy and the rise in gross domestic product in the last three months driving up employment are all boosting consumer confidence and helping to drive the property market on, said Martin Ellis, housing economist at Halifax.
“Official schemes, such as the Funding for Lending Scheme and the Help to Buy equity loan scheme, may also be raising demand,” he added.
“House prices are expected to continue to rise gradually through this year with only modest economic growth and still falling real earnings constraining housing demand and activity.”
However, surveyors report an overall increase in homeowners instructing valuations for their own homes, either to test the market or put homes up for sale, which could rebalance the market.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “With surveyors reporting a small increase in the supply of property coming to the market we would anticipate that this will continue particularly with the next phase of Help-to-buy gathering momentum and due to come on stream in January 2014.
“Many property owners will be buoyed by both the increase in prices that will help those whose equity has been eroded and gaining access to a wider choice of high loan to value mortgages that Help-to-buy 2 should deliver will enable more people to buy a property and or move home, providing benefits to them individually and the knock on effects to the wider economy.”
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