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In January prices were 3.6% higher on an annual basis. This is the largest increase in the annual rate of change - measured by the average for the latest three months against the same period a year earlier – since February 2008.  The comparable rate a year ago was –17.2%. 

Housing market activity continues to pick up albeit from a low base. House sales in England and Wales in October were 34% higher than a year earlier, according to the latest Land Registry figures. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase – a leading indicator of completed house sales – in the final three months of 2009 was significantly up on the number in the same period a year earlier (176,517 against 91,221).

This was despite a marginal monthly fall (-1.7%) in December; the first decline since November 2008. Approvals were still 22% lower than in December 2007.

Low mortgage rates have reduced the burden of servicing mortgage debt. Nationally, typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in 2007 Quarter 3 to 32% in 2009 Quarter 4. 

Low supply of properties for sale has been another factor pushing up house prices. There are, however, some signs that the improvement in market conditions since last spring is leading more homeowners to try to sell their property. Instructions to sell increased for the seventh successive month in December, helping to increase the stock of properties available for sale. 

Martin Ellis, housing economist, said: "House prices rose by 0.6% in January. This was the seventh successive monthly increase and takes the average price to 9.9% above its trough in April 2009. January's rise, nonetheless, was more modest than in any of the previous six months.

"The marked reduction in interest rates over the past 15 months has, from a low base, boosted housing demand from those with a sufficient deposit to enter the market. Increased demand has combined with a low supply of properties available for sale to push up prices.

"There are some signs that more people are putting their homes on the market. A further increase in the supply of property is possible over the coming months, which would help to curb upward pressure on prices. Overall, our current view is that house prices will be flat during 2010."   

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