House prices rose 6.5 per cent during the 12 months ending December 2016, according to Halifax data released today (9 January).
The lender’s index also tracked a year-on-year monthly rise of 1.7 per cent, and a year-on-year quarterly rise of 2.5 per cent.
The average house price stood at £222,484 at 31 December 2016.
Martin Ellis, Halifax housing economist, said an ongoing shortage of property for sale and low interest rates had kept prices in positive territory.
He predicted that slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, would reduce housing demand during 2017 but that prices would continue to rise.
Mr Ellis said: “UK house prices should, however, continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates. Overall, annual house price growth nationally is most likely expected to slow to 1-4% by the end of 2017.
"The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year.”
According to Halifax the quarterly figure was the highest rise since March 2016, when prices rose 2.9 per cent.
The annual rise was the second consecutive increase in the annual rate from a 2016 low of 5.2 per cent in October and compared to 6 per cent in November.
Despite the increases in November and December, the annual rate remains significantly below the 10 per cent peak recorded in March 2016.
Luton recorded the biggest percentage rise in house prices among major UK towns and cities over the past year, according to recent separate research by Halifax.
The average house price in the Bedfordshire town was 19. per cent higher than in the previous year, increasing from £214,934 to £256,636 in 2016.
The outer London borough of Barking and Dagenham experienced the second biggest rise in average house prices with an increase of 18.6 per cent. Dunstable – Luton’s near neighbour – completed the top three with a 17.9 per cent rise.