Halifax said house values in the region have risen by 12.7 per cent in the last year, and now stand at an average of £250,051.
But there are signs that the housing market is slowing down, a trend is likely to continue with this week’s rise in interest rates.
UK-wide house prices slipped back in July from a record high the previous month, marking the first month-on-month dip since June last year, according to an index.
Following a year of exceptionally strong growth, house prices fell by 0.1 per cent month on month in July, Halifax said.
This represented a £365 month-on-month fall in cash terms, the bank said.
The average house price in the West Midlands is more than £40,000 below that of the UK as a whole, which now stands at £293,221.
But it stands above the East Midlands, which is at £243,197, up 12.2 per cent, and Wales, which has seen a 14.7 per cent increase to £222,639. The average house price in London is now £551,777, up 7.9 per cent on the year before.
Halifax said in the UK as a whole, the annual rate of price growth slowed to 11.8 per cent, down from 12.5 per cent in June.
Russell Galley, managing director, Halifax, said: “It’s important to note that house prices remain more than £30,000 higher than this time last year.
“While we shouldn’t read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
“Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.
“That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand – still remain evident.
“The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
“Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold.
“Therefore a slowing of annual house price inflation still seems the most likely scenario.”
Anna Clare Harper, director of real estate technology platform IMMO, said: “This slight cooldown will be welcomed by those struggling with affordability constraints.”
Jason Tebb, chief executive of property search website OnTheMarket.com, said: “The number of properties coming to the market is slowly increasing, partly down to seasonal effects when we’d expect increased levels of stock to become available.”
Nicky Stevenson, managing director of estate agent group Fine & Country, said: “Cheap debt is fast disappearing and, against this backdrop, we can expect to see a dampening effect as purchasing power continues to be eroded.
“While the housing market and broader economy do not always move in tandem, the recession predicted by the Bank of England is bound to have an effect on growth and consumer confidence.”
A package of Government cost-of-living support is being delivered in the months ahead, with households facing the prospect of soaring bills and shrinking real incomes for some time to come.
Alice Haine, personal finance analyst at Bestinvest, said: “Once a recession digs in, then the threat of job losses will raise its ugly head – damaging buyer confidence and dampening the market in the process.
“The real turning point could be the Bank of England’s decision yesterday to hike interest rates to 1.75 per cent.”
The Bank of England raised the base rate by 0.50 percentage points on Thursday, taking it from 1.25 per cent to 1.75 per cent, marking the biggest single rate jump since 1995.
This will add around £50 per month to average tracker mortgage costs, based on average balances outstanding, according to calculations from trade association UK Finance.
In a grim warning on Thursday, the Bank said people face two years of tumbling household incomes, with inflation set to soar to more than 13 per cent and the economy plunging into the longest recession since the financial crisis.
The Bank’s Monetary Policy Committee (MPC) forecast inflation peaking at 13.3 per cent in October, the highest for more than 42 years.
On a real basis, households’ post-tax incomes are set to fall 1.5 per cent this year and 2.25 per cent the next.
It would be the first time since records began in the 1960s that household incomes have fallen for two years in a row.
Here are the average house prices in July, followed by the annual house price increase, according to Halifax:
– West Midlands, £250,051, 12.7 per cent
– East Midlands, £243,197, 12.2 per cent
– Wales, £222,639, 14.7 per cent
– Eastern England, £342,687, 12.2 per cent
– London, £551,777, 7.9 per cent
– North East, £170,688, 11.3 per cent
– North West, £226,665, 12.6 per cent
– Northern Ireland, £187,102, 14.0 per cent
– Scotland, £203,677, 9.6 per cent
– South East, £399,003, 11.9 per cent
– South West, £310,846, 14.3 per cent
– Yorkshire and the Humber, £205,249, 10.4 per cent