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House prices soar at fastest rate in five months

House prices have risen by their highest rate in five months, fuelling fresh hopes for the sustained recovery of the economy.

Figures today from Nationwide — Britain's biggest building society — came in far higher than economists expected. House prices rose 1.2 per cent this month, as opposed to the 0.2 per cent economists predicted, and 8.6 per cent over the year. Nationwide said it expected annual house-price inflation to hit double digits for the first time in nearly three years.

The good news for the economy continued with the monthly confidence index from market research company GfK which showed that consumer confidence has risen for the first time in three months.

But the positive economic data gave rise to the worry that interest rates might rise. Nationwide's chief economist Martin Gahbauer said higher rates “may be required sooner than is widely assumed”, leaving homeowners with variable-rate mortgages struggling to meet repayments and triggering higher repossessions. It would also prevent new buyers from entering the market, potentially derailing the housing market's recovery.

Still, the Government will be celebrating the data, which shows a ninth consecutive month of house-price rises.