Annual house price growth accelerated to 11.2% in January, the highest level for the opening month of a year since 2005, the latest Nationwide House Price Index has revealed.

The figure is up from 10.4% in December, as prices also climbed by 0.8% on a monthly basis.

January also represented the sixth consecutive monthly increase, after taking account of seasonal effects, to take the average UK house price to £255,556.

Commenting on the figures, Nationwide chief economist, Robert Gardner, said that housing demand has “remained robust”.

“Mortgage approvals for house purchase have continued to run slightly above pre-pandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax,” Gardner said.

“The total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck. At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth.”

Nationwide also warned that the outlook for the housing market currently looks “uncertain” but anticipates that activity across the market will slow in 2022.

“House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable,” Gardner added.

“Reduced affordability is likely to exert a dampening impact on market activity and house price growth, especially since household finances are also coming under pressure from sharp increases in the cost of living.”

CEO of The Mortgage Lender, Peter Beaumont, added: “Borrowing costs are rising and banks are likely to tighten their lending criteria, leaving buyers high and dry if they cannot get past stricter mortgage affordability tests.

“However, there might be help on the horizon as the FCA considers encouraging lenders to ease affordability tests. And of course, rising wages my offset some of the effects of the cost of living rises we are seeing.

“Ultimately, the housing market needs to work together to provide alternative solutions for aspiring buyers, or it risks blocking out anyone with so much as a blemish on their credit record.”

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