May was a shaky month for the housing market as house prices fell again after several months of small rises. However, the figures for June show that the fall was short-lived and, although another fall cannot be ruled out, calm is returning to the market. 

The latest figures show that UK house prices rose by 0.9% in June. This was the third rise in the past four months, and shrank the annual rate of decline to just 9.3%, from 11.3% in May.  

The increase in prices during the past month means the average home now costs £156,442, which is £15,973 less than a year ago.  

Since their recent low point in February, of £147,746, average UK house prices have now risen by £8,696.  

Analysts suggest that the best measure of short-term trends is to compare the average price for the past three months with that for the previous three. On that basis, prices were now 0.9% higher, the first time they have been on an upward trend since December 2007.  

If the pattern continues then this year would end with prices down by just a small amount. This would represent a stark shift from trends seen at the turn of the year, when most indicators were pointing to a repeat of the large declines seen in 2008. 

Despite this good news analysts are predicting bad news as well. Abnormally low levels of supply caused by individuals and builders holding their properties off the deflated market will not last for ever. 

The increase in the number of enquiries has not yet led to large increases in transaction volumes, because the conditions of acquiring credit are more restrictive than in the years leading up to the downturn. 

Rising unemployment and associated job insecurity are also limiting the extent to which enquiries can translate into actual transactions. 

Just last week, HM Revenue & Customs (HMRC) reported that completed house sales in the
UK had risen again in May, to their highest level since last October. And the Bank of England recently reported that the number of mortgages approved by lenders, but not yet lent, had risen for the fourth month in a row in May. This suggests that the revival in buying and selling seen this spring may continue into the summer.  

What is clear from the new statistics is that house prices have risen in three of the last four months, suggesting that the improvement that began to show in March is more than variations within a margin of error.

There has been a large increase in the cost of new fixed rate mortgages this week. Figures show that the interest rates for the average two-year deal have gone up by 0.16% to 4.9%.

The average five-year fixed- rate mortgage has risen by 0.21% since the start of the week to 5.82%. This rise is due to an increased cost of inter-bank borrowing, and is the biggest jump since June last year.

Analysts are now pointing out how quickly lenders increase their fixed rate mortgages when the costs rise but how slowly they decrease them when the costs fall.

The increases started a week ago with the Nationwide building society. Since then it has been followed by 13 other lenders, including the Britannia, Cheltenham & Gloucester, Abbey, Woolwich and the Yorkshire building society.

This means that typically the “best-buy” deals have gone up in cost by about 0.5%.

With the official bank rate at 0.5% and highly unlikely to go any lower, fixed rate deals have become popular again this year. They currently account for more than 60% of all new deals, as borrowers have sought to protect themselves against future increases in the cost of borrowing.

Earlier this week the Bank of England, in its latest report on lending trends, said lenders were also building a greater financial cushion into their loans, in case higher unemployment caused more borrowers to default.

As a point of interest, the ‘official’ best five-year deal at the moment is from the Post Office with an interest rate of 4.45% for a borrower who can put down a 40% deposit and pay a fee of £599. Of course, for many people it is no such thing as the 40% deposit and a large fee make it out of their reach.