Annual house price growth is now 3.2 per cent according to Nationwide - an unexpected rise from the 2.6 per cent recorded at the end of last year.
House prices also increased by 0.6 per cent over the month after taking account of seasonal factors, the same increase as December. A typical home is now £211,756.
The acceleration in price growth comes despite mortgage approvals declining to their weakest level for three years in December, at just 61,000. There was also subdued mortgage activity in October and November, with few signs of an imminent pickup.
“But activity has been subdued on both the demand and supply side of the market” says Nationwide’s chief economist, Robert Gardner.
“The flow of properties coming onto estate agents’ books has been more of trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices” he says.
Gardner believes the market’s performance in the year ahead will be determined mostly by the wider economy and the outcome of Brexit negotiations.
“We continue to expect the UK economy to grow at modest pace, with annual growth of 1.0 per cent to 1.5 per cent in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth” he says.
“Nevertheless, housing market activity is expected to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the subdued pace of building activity evident in recent years and the shortage of properties on the market are likely to provide ongoing support for house prices.”
In response to the figures, leading London estate agent Jeremy Leaf - a former RICS residential chairman - says: “At the sharp end we have seen an uplift in terms of viewings and more confidence than we dared to expect. Looking forward we have to now make sure as many of those enquiries as possible translate into sales, which will be the real test for the market this year.”