London drives rise in house prices

House prices increased last month across England and Wales, but the boost was driven by London while more than half of regions saw prices fall year on year, Land Registry figures have showed.

Prices rose by 0.8% in July compared with the previous month to reach £162,900, which is also an annual increase of 0.3%, the latest report showed.

But a 6.5% annual increase in London, taking average prices to £367,785, helped to mask the drops seen in many other regions.

Prices fell year on year by 1.3% in Wales, by 0.8% in the West Midlands, by 2.5% in Yorkshire and the Humber, by 1.9% in the South West and by 3.8% in the North East. The North West recorded the biggest year-on-year fall, with a 3.9% decrease taking typical prices to £109,235.

The remaining regions which did see prices increase annually saw much more modest rises than those recorded in London, which has had strong interest from overseas buyers. Prices rose year on year by 0.4% in the East Midlands, by 0.7% in the South East and by 0.8% in the East.

A report from property analyst Hometrack published earlier this week said that prices are expected to remain under downward pressure for the rest of the year as growth in the number of homes for sale outstrips potential buyers.

Nationwide has pushed up some mortgage rates for new borrowers and Santander has also announced plans to increase its standard variable rate (SVR), which will see a few hundred thousand of its existing customers' mortgage payments go up from this autumn.

The Bank of England and the Treasury recently launched a "funding for lending" scheme to unclog the flow of credit, although analysts have said they have seen little evidence so far that this has increased the availability of mortgages for people with lower deposits.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The Land Registry data is less gloomy than some of the other house price indices and yet the housing market in parts of the country really is suffering. The jury is still out on whether the Bank of England's emergency funding will have the desired effect."

The latest figures also showed the number of property sales has increased slightly compared with last year. However, the period for this year covers the run-up to the ending of a stamp duty concession for first-time buyers in March, which lenders said had the effect of bunching up sales as people rushed to beat the deadline.