House prices had their strongest improvement in a year in a sign that increasing mortgage affordability and hopes about interest rate cuts are buoying the market, according to a lender.

Property values slumped by 0.2pc in the 12 months to January, the Nationwide house price index showed, which was the best showing since the same month a year earlier, having fallen by 1.8pc in 2023.

Prices rose by 0.7pc between December and January, making the average home worth £257,656.

It comes despite the lender saying last month that it expects house prices to remain flat or decline by 0.2pc this year as mortgage rates moderate “only gradually” from the highs seen this year.

Figures published by the Bank of England on Tuesday showed net mortgage approvals rose from 49,300 in November to 50,500 in December, while net approvals for remortgaging increased from 25,700 to 30,800.

Robert Gardner, Nationwide’s chief economist, said: “There have been some encouraging signs for potential buyers recently with mortgage rates continuing to trend down. 

“This follows a shift in view amongst investors around the future path of Bank Rate, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.”

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