The August survey from assertahome.com shows a recovery in house-hunter confidence in the housing market for the first time since interest rates began to rise.

In August, 30.3% of house-hunters expected house prices to fall over the next twelve months compared to 35% in July, but still substantially more than the 9% in January who were pessimistic about the future.

In August a positive upturn in confidence appears with 65.7% expecting the market to rise in the coming twelve months, up from 56.9% in July.

Despite a brighter outlook than in recent months, regions to the South remain much less optimistic and once again, the Scots are among the most upbeat about the prospects for house prices in their area, just behind the Welsh. The North remains the one gloomy spot among the Northern regions, with 46% expecting prices to fall.

Of those who do expect prices to fall, there is even greater awareness that rising interest rates will be a principal cause; 76% cited this factor as one reason for their pessimism compared to 71% in July.

There is growing confidence in the economy overall, however. 33% of the house price optimists said economic growth explained their optimism (steadily rising from 20% in January).

In concert with the recovery in optimism, the multiples of household income that house-hunters are prepared to pay for their new home rose in August to an average of 4.8, in line with June, but still well down from the May 2004 peak of 5.0x.

In total, respondents now expect national house prices to rise 2.7% over the next twelve months, up from just 1% in July, but down sharply from 6.6% in May.

Jim Buckle, Managing Director of assertahome.com commented: "Although interest rates rose again in August, house-hunters breathed a collective sigh of relief at Mervyn King’s much delayed recognition that the housing market is indeed responding to the MPC’s aggressive action on borrowing costs and that rates may not need to rise much further."

"Confidence in the future of the market rose slightly as a result. We believe, however, that this is a temporary fillip and that confidence will subside again over the coming months as consumers’ pockets increasingly feel the pinch of higher rates."

"Even the laggard house price indices have finally registered the end of the boom and there is certainly nothing to justify further MPC pressure on hard-pressed mortgage borrowers."