The index also revealed that the annual rate of increase rose to a six-month high of 3.8% in July from a 7-month low of 2.5% in June.

House prices appear to have been lifted in July by the easing of lockdown restrictions in England from mid-May, and in Wales, Northern Ireland and Scotland (at end of month) in June.

The latest Bank of England data shows that mortgage approvals for house purchases rose to 40,010 in June from May’s record low of 9,273 while survey and anecdotal evidence for July has shown improvement.

Housing market activity may well see a pick-up in activity in the near term – supporting prices – as a result of the raising of the Stamp Duty threshold to £500,000 along with the release of some pent-up activity following the easing of lockdown restrictions.

However, economic forecaster EY ITEM Club, suspects the upside for the housing market will be limited due to challenging fundamentals for consumers. The housing market is likely to come under pressure over the final months of 2020 and start of 2021 when there is likely to be a marked rise in unemployment.

The forecaster said that there could be some temporary support in the first quarter of 2021 with buyers looking to take advantage of the Stamp Duty threshold increase before it ends on 31 March – although there is always the possibility that the Chancellor could extend it in the Autumn budget.

The EY ITEM Club suspects that house prices could be around 3% lower than now around the turn of the year. Housing market activity should gradually improve as 2021 progresses and the UK’s economic recovery gains traction. Very low borrowing costs should also help matters with the Bank of England unlikely to lift interest rates from 0.10% during 2021.

Even so, expect house price gains to be no more than 2-3% in 2021.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “The EY ITEM Club expects the housing market to remain under pressure over the early months of 2021, although some temporary support in the first quarter will likely come from buyers looking to take advantage of the Stamp Duty threshold increase before it ends on 31 March – although there is always the possibility that the Chancellor could extend it in the autumn Budget.

“As a result, the EY ITEM Club suspects that house prices could well be around 3% lower than now around the turn of the year.

“The EY ITEM Club does expect housing market activity to gradually improve as 2021 progresses and the UK’s economic recovery gains traction, the labour market starts to recover and consumer confidence improves. Very low borrowing costs should also help with the Bank of England unlikely to lift interest rates from 0.10% during 2021. Even so, expect house price gains to be no more than 2-3% in 2021.”