The increase followed a similarly robust gain of 1.8 per cent in July; this lifted the year-on-year increase to 3.7 per cent in August (the equal highest annual rise with April since February 2017) from 1.5 per cent in July and a marginal dip of 0.1 per cent in June.

Throughout August, housing market activity continued to be buoyed by the easing of lockdown restrictions across the UK. This trend has been reinforced by the Chancellor raising the Stamp Duty threshold to £500,000 from mid-July through to 31 March 2021.

At the same time, mortgage approvals have returned to pre-COVID levels and consumer borrowing has picked up, signalling that economic life is returning to normal after lockdown.

According to the latest figures from the Bank of England, mortgage approvals rose to a five-month high of 66,300 in July from just under 39,900 in June. The figure was better than forecasts for 55,000 and was more than seven times higher than the 9,300  recorded in May.

Mortgage approvals are now only 10 per cent below February’s high of 73,700 and are in line with the average before the pandemic struck.

In terms of value, mortgage approvals hit a record high of £16.7 billion in July, a 64 per cent increase month-on-month and 7.3 per cent higher than last year, as deals were cleared on higher-value properties.

Bank of England data also revealed that after four months of debt reduction, unsecured borrowing increased by £1.2bn in July, slightly above the average before lockdown. 

There has also been a substantial drop in the rise in household deposits. Deposits rose by £7bn in July, down from £11.7bn in June and slightly above pre-pandemic levels. 

Andrew Wishart from Capital Economics commented: “Overall, these figures support other evidence that the economy continued to recover in July, but we still think that the realisation of more job losses after the furlough scheme started to be wound up in August will cause the recovery to slow.”

Forecasters have anticipated a further pick-up in housing market activity and house prices in the immediate future. However, the EY ITEM Club suspects the upside for the housing market will be limited due to challenging fundamentals for consumers. It believes that the housing market is likely to come under pressure over the final months of 2020 and start of 2021 due to a significant rise in unemployment. There is also likely to be a fading of the pent-up demand effect.”