Annual house price growth remained stable in August at 1.6%, compared with 1.4% in July, the latest Nationwide house price index shows.
Prices were up 0.2% month-on-month, with the average property price now £275,465.
Robert Gardner, Nationwide's chief economist, said: “Market activity and house prices have remained subdued in recent months, in part reflecting the uncertain economic backdrop. Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices and market interest rates.
“Market expectations of the future path of Bank Rate have been volatile. While the latest energy price shock poses inflation risks, there have been encouraging signs that it is not feeding through to underlying price pressures. Indeed, private sector wage growth has eased further in recent months, which should give policymakers breathing space to assess the extent to which tighter policy is necessary to ensure inflation returns sustainably to target.
“Underlying affordability is improving, as house price growth remains well below earnings growth. although some of these gains have been offset by higher mortgage rates. Nevertheless, this suggests that activity should regain momentum in the quarters ahead providing the energy shock wanes and confidence returns, especially if market interest rates fall back towards pre-conflict levels."
Jason Tebb, president of OnTheMarket, commented: “Broadly stable property values indicate a subdued market as focused buyers prepared to make their move during the usually quieter summer period proved to be price-sensitive in their negotiations.
"However, market resilience continues to be evident even while higher mortgage costs and economic uncertainty bring an element of caution. The market has steadied, helped by a calm hand at the tiller from the Bank of England with consecutive interest rate holds allaying fears and helping with affordability.
"Should mortgage rates remain stable and economic uncertainty eases, this could filter through to renewed activity and sales in the autumn. Inactivity isn’t an option for many, even if a new Prime Minister and another Budget brings an inevitable degree of doubt."
Ian Futcher, financial planner at Quilter, added: “The housing market remains caught between resilient demand and uncertainty over where borrowing costs go next. While buyers have become more accustomed to a higher interest rate environment, many are still reluctant to make major financial commitments when the outlook continues to shift.
“Over recent months, expectations for interest rates have been driven by the stop-start nature of the conflict in the Middle East. Whenever tensions appear to ease, hopes of lower borrowing costs begin to build. However, as concerns over energy prices and inflation resurface, markets quickly start questioning whether rates may need to remain higher for longer.
“That leaves the housing market in something of a holding pattern ahead of the Bank of England's next interest rate decision on 17 September. While a hold remains the most likely outcome, it is becoming increasingly difficult to call with confidence. Markets are still pricing in the possibility of one further rate rise this year, while others argue policymakers may wait until after the Budget before acting so they can assess whether any fiscal measures help bring inflation under control or add to inflationary pressures instead.
“For borrowers, the key message is that rates may not have peaked. Many had hoped the conversation would be focused on when cuts might arrive, but there remains a realistic possibility that borrowing costs move higher before they move lower. Until that uncertainty lifts, buyer confidence is likely to remain subdued.
“Ultimately, demand for homeownership remains strong, but affordability and interest rate expectations will continue to dictate the pace of the market. Greater confidence that borrowing costs are on a stable path would provide a meaningful boost to activity, but for now caution continues to prevail.”
