British house prices are now higher than they were a year ago, in the first annual house price rise for 19 months.

New figures from Nationwide show that during October, house prices rose by 2 per cent compared to the same month last year, signalling the first annual rise since March 2008.

However, the monthly pace of growth is slowing, with house prices rising by 0.4 per cent in October, compared to 0.9 per cent in September and 1.4 per cent in August. Prices have been slowly rising on a monthly basis since May.

Nationwide said that this could be due to more sellers returning to the market, creating more competition.

Martin Gahbauer, chief economist at Nationwide, said: “Although too early to tell, this may reflect a more natural level of stock available for sale coming to the market, alleviating some of the extreme shortages of property on the market seen during most of this year.”

Commenting on the impact of Britain's recession, Mr Gahbauer said: “On the one hand a deeper and longer recession implies higher levels of unemployment and a longer period of subdued wages, both of which will act as constraints on the housing market’s recovery.

“On the other hand, the figures mean that interest rates are likely to remain at or near their current record lows for well into the next year. As a result, mortgage affordability will remain relatively favourable.”

The average house price is now £162,038, still 13 per cent lower than their October 2007 peak of £186,044.

The surveys produced by Nationwide are based on mortgage valuations for properties being purchased by borrowers seeking loans from the lender. This means that unlike the Land Registry figures, which must wait for transactions to go through, the Nationwide index is generally considered one of the most up-to-date.

Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, said that the removal of the stamp duty holiday, which has extended the threshold at which stamp duty is payable from £125,000 to £175,000 until the end of this year, could also affect house price growth.

He said: "This is likely to be less of a problem in London and the South East but elsewhere, it could have more of an impact. Property sales, although picking up, are still well down on what may be considered 'normal'. At a time when first-time buyers are still struggling to access mortgage finance and, in most cases, are reliant on hefty support from parents to take an initial step onto the market, the risk is that the move to end the holiday could arrest the tentative improvement in turnover."

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