Property price growth slowed to 2.9% in July from 3.1% in June, Nationwide’s House Price Index has found.
House prices increased by 0.3% on a monthly basis to average at £211,671.
Robert Gardner, Nationwide’s chief economist, said: “The annual pace of house price growth remained broadly stable in July at 2.9%, only a touch lower than the 3.1% recorded in June.
“On the surface, this appears at odds with recent signs of cooling in the housing market. The number of housing transactions dipped to their lowest level for eight months in June, while in the same month the number of mortgages approved for house purchase moderated to a nine-month low of c.65,000.
“But a lack of homes on the market appears to be providing support, with annual house price growth remaining only just outside the 3-6% range, that has been prevailing for most of the past two years.
“This pattern looks set to be maintained in the near term.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “We would have expected transactions in particular to be higher compared with last year bearing in mind how much quieter the market was 12 months ago following the introduction of the stamp duty surcharge.”
But he added: “On the plus side, activity could be much lower considering current political uncertainty and fortunately there does seem an enthusiasm among serious buyers and sellers to get on with the job in hand.
“The current climate is also providing an opportunity for first-time buyers at least to better compete for smaller properties.”
Russell Quirk, founder and chief executive of eMoov, was encouraged by Nationwide’s index.
He said: “At a glance, it looks as if the dark clouds of buyer and seller uncertainty are finally starting to lift from the UK housing market, with welcome signs of positive property price growth beginning to shine through.
“The summer months can generally be a slower time of year with many taking a break from their sale to go away, so it is promising that the market has bounced back despite the slump in transactions and mortgage approvals witnessed in June.
“Although buyer demand may take some time to return to normal levels, a sustained shortage of stock should continue to stimulate an upward price trend.”