House prices increased by 0.6% in July reversing the fall in June, the Halifax House Price Index reveals.
The year-on-year change saw an increase of 4.9% while the average house price now stands at £167,425.
The annual rise is below the 6.3% increase in June and the recent high of 6.9% in May.
The average house price is now 16% below its August 2007 peak.
Martin Ellis, housing ecponomist at Halifax, says: “Overall, there has been little change in prices during 2010 so far. The mixed pattern of monthly rises and falls over the first seven months of the year is consistent with a slowing market. It is also in line with our view that house prices will be broadly unchanged over 2010 as a whole.
The increase in the number of properties for sale over the past few months, boosted by the recent abolition of HIPs, has relieved much of the pressure that was driving up prices in 2009. Low interest rates and a recovering economy, however, are underpinning demand and continue to support the market.”
Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase in the three months to June rose modestly, by 2%, in Q2 2010.
But activity remains significantly lower than a few years ago with approvals 56% lower in Q2 2010 compared with Q2 2007.
Prices in July were 0.8% lower than at the end of 2009 but are 8.3% above their April 2009 trough.
Typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in Q3 2007 to 30% in Q2 2010.
This level is higher than the long-term average over the past 25 years, 37%, and is a key factor supporting housing demand.
In separate research to be released later this week, Halifax has found that the total value of privately owned housing stock in the UK more than doubled over the past decade.
There was a 118% increase from £1,719bn in 1999 to an estimated £3,755bn in 2009.
During the same period, the retail price index rose by 29% but since 2007 the value of housing stock in the UK has declined by 8%.