House prices 'pick up in January'

The UK housing market made a "strong start" in 2006, with prices rising 1.4% in January, the Nationwide has said.

The increase - the biggest monthly rise since July 2004 - took the annual rate of house price growth to 4.4%.

Over the November to January period, prices were up 1.8% compared with the previous three-month period.

Nationwide said the rise was helped by increased confidence amongst buyers. However, it added that strong price rises were unlikely to persist in 2006.

'Strengthening trend'

January's increase meant that the average house now costs £158,478, Nationwide said.

Subsequently, figures from the Bank of England revealed that the number of mortgage approvals for house purchases reached a 19 month high in December.

The building society said that the release of "pent-up demand" since August's interest rate cut had also contributed to the pick-up in the market.

The main message here is the unremitting strength of the mortgage market Philip Shaw, Investec chief economist Jump in mortgage approvals

"This is the strongest monthly rate of growth since July 2004 when it was 1.9% and the annual rate of house price inflation was more than 20%," Nationwide group economist Fionnuala Earley.

"The annual rate of house price inflation in January 2006 is a more modest 4.4%.

"Even so, this is a significant increase in price and confirms the strengthening trend we have seen since October."

She added that three-quarters of the price rises experienced in the market over the past year had taken place in the past four months.

However, looking ahead, factors such as pension fears, declining consumer appetite for debt and below-average economic growth are to set to restrain price rises in 2006, Ms Earley warned.

"It is unlikely that the market could absorb another strong rally of house price inflation," Ms Earley added.

At the turn of the year, Nationwide predicted that house prices would rise by 3% during the course of 2006.