House prices rose by 0.8% in July following three flat months for the market, according to one of the UK’s biggest mortgage lenders.

Halifax said the average cost of a home rose by more than £2,200 to £291,268 last month, when compared with June.

The month-on-month increase was bigger than expected. Economists had forecast a rise of around 0.3%, according to a Reuters poll.

Annual prices also grew by 2.3%, the lender said on Wednesday.

It comes amid expectations of a pick-up in the market after the Bank of England cut interest rates on 2 August for the first time in more than four years.

The quarter percentage point reduction to 5% came after the period covered by Halifax’s figures.

However, the banking brand’s head of mortgages Amanda Bryden said: “Last week’s cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder.”

But she cautioned that “affordability constraints and the lack of available properties continue to pose challenges for prospective homeowners”.

Ms Bryden added: “Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.”

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On a regional basis, Halifax said there had been strong growth in the North West, where month-on-month prices increased by 4.1%. The average property there is said to cost £232,489.

The lender said London continues to have the most expensive property prices, with the average home in the capital now said to be £536,052.

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Economist Ashley Webb, from research firm Capital Economics, said the nationwide rise was “further evidence that house prices are bouncing back from the slight rise in mortgage rates in the first half of this year”.

He added: “While we think the Bank of England will hold off until November before cutting interest rates again, the risks are now skewed to the next rate cut happening a bit sooner than we anticipate.

“That may mean house price growth accelerates quicker than we expect over the rest of this year.”

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Sam Mitchell, the chief executive of online estate agents Purplebricks, said: “The growing confidence we’ve seen take hold of the housing market in recent weeks has been supercharged by the Bank of England’s interest rate cut.

“With lenders already slashing mortgage rates in response to last week’s decision, buyers are beginning to move ahead with purchasing decisions they have been putting off for months.”

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