The annual rate of growth was 2.2.%, easing slightly from the 2.5% rise recorded in July.

Northern Ireland retained its position as the UK’s strongest performing region, with prices rising 8.1% over the past year, a typical home now costing £217,082.

Halifax said there is a clear North/South divide as the North East, North West and Yorkshire and the Humber see annual growth above 4%.

Meanwhile, the South West saw prices fall 0.8% in the same period, making it the first UK region to record an annual decline since July 2024.

Scotland saw a strong annual increase of 4.9% while the pace of growth has eased in Wales with the average home now costing £227,786.

London has seen modest growth with prices up 0.8%, remaining the most expensive region in the UK with an average property value of £541,615.

Tomer Aboody, director of specialist lender MT Finance, said: “Lower mortgage rates, combined with sellers pricing more sensibly even though the national average house price is at a record high, is encouraging buyers to transact and take advantage of finding themselves in a reasonably strong position.

“However, the constant uncertainty of ‘what next?’ from the Chancellor is not helping the market.

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“The property market is important to the wider economy with any further increases in tax and costs having a negative knock-on effect.”

Tanya Elmaz, managing director of intermediary sales at Together, added: “A modest rise in house prices in August, which follows a significant increase in July, shows a level of confidence returning to the market.

“Though the Bank of England base rate cut in August will have helped to fuel this momentum, factors such as the gloomy economy and fluctuating swap rates cannot be ignored as potential detractors to continued house price growth over the rest of the year.

“It may be months until the Bank’s next rate cut, and rumoured tax changes at the upcoming Autumn Statement, including a potential property tax on houses worth over £500,000 may dampen activity as buyers assess the unknown secondary impacts.”

Steve Griffiths, commercial director for retail mortgages at Shawbrook, commented: “House prices continued to heat up alongside summer temperatures, driven by the slow but steady fall in interest rates and continued rises in wage growth.

“This is especially welcome news for mortgage holders coming to the end of fixed-rate deals, who will likely benefit from the lower mortgage rates and feel encouraged by the resilience of the property market against wider economic uncertainty.

“Looking ahead to the Autumn Budget, rumours are swirling around possibly scrapping stamp duty and changing rules around capital gains tax; however, prospective home buyers should not let this deter them from moving forward with their property plans.”