LONDON 

House prices in the UK surged to a two-year high in August, with increased confidence among homebuyers following a recent interest rate cut, according to the nation's largest mortgage lender on Friday.

Halifax reported that average property prices rose by 4.3% year-on-year, bringing the average cost of a UK home to £292,505 ($385.521).

The lender, which is owned by Lloyds Banking Group, said the Bank of England's decision to reduce interest rates at the start of August — the first cut in four years — has bolstered market sentiment.

Despite the boost, house prices remain slightly below the record of £293,507 ($386,585) in June 2022.

"While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs," Amanda Bryden, head of mortgages at Halifax, said in a statement.

Interest rates, while recently cut, remain high at 5%, their highest level since 2008, when the global financial crisis threatened to collapse major banks.

Home prices edged up 0.3% in August, compared to a 0.9% rise in July, reflecting steady growth in the housing market.

Looking ahead, the Bank of England is expected to make further cuts to interest rates this year, although the timing remains uncertain. The bank's next meeting is scheduled for Thursday, Sept. 19.

Bryden added: "With market activity picking up and the possibility of further interest rate reductions to come, we expect house prices to continue their modest growth through the remainder of this year."