However, this has slowed from 1.9% in June 2023.

Average house prices increased to £309,000 in England (0.6%) and £192,000 in Scotland (0.1%), while average house prices in Wales decreased by 0.1% to £216,000.

The North East saw the highest annual percentage change of all English regions in the 12 months to July 2023 (2.7%), while the South West saw the lowest at -1%.

Atom bank head of mortgages Richard Harrison says: “Today’s data shows house prices are rising more slowly, with an annual increase of 0.6%.

“This change was somewhat anticipated when you consider the sharp rise in borrowing costs customers have faced over the summer months, which has led to purchasing activity falling considerably below the levels seen last year.

“This is particularly true of London, which has seen house prices fall by 0.8% annually as customers face greater affordability challenges in the capital.

“Most commentators expect prices to remain suppressed over the short-term, but do not expect to see double digit falls on the basis that employment levels perform as expected.

“Looking more positively at the situation, moderately lower house prices coupled with on-going growth in wages could improve affordability for prospective buyers.

“In addition, mortgage pricing has been falling during September and could continue with inflation dropping faster than expected.

“That being said, borrowers should still get used to higher rates, with the base rate expected to remain higher for longer.”

Saffron for Intermediaries head of business development Tony Hall says: “Today’s figures are no surprise given the affordability challenges that exist in the market at present.

“However, the downward trend in house prices is far less significant than some analysts were predicting at the beginning of the year, and recent reductions in mortgage rates could stimulate increased activity in the market in the coming weeks and months.

“Scotland and parts of the North-West are also giving us reason to smile, with the housing market in these areas showing notable resilience through a challenging period.

“That being said, with interest rates likely to rise further before the end of the year, affordability will remain a key challenge for those looking to buy, or build, a home.”

The Guild of Property Professionals chief executive Iain McKenzie says: “Despite gloomy predictions, house price growth is still positive, and good news on inflation means that the market can be optimistic about autumn.

“Sellers may worry about the value of their home, but it’s important to remember that it‘s still worth much more than it was prior to the pandemic. 

“Continuing buyer demand is helping hold up the market and keeping property prices buoyant in the face of challenging conditions.

“Today’s inflation figures will add to downward pressure on mortgage rates, offering a welcome respite to first-time buyers and those nearing the end of fixed deals.

“Autumn is typically a busy season for estate agents, and there’s a few glimmers of hope that the end of the year will see the market turn.”