House prices in the three months to September were 2.0% higher than in the previous quarter, according to the Halifax House Price Index for September.
This was slightly below the increases recorded in June, July and August.
The annual rate of increase, however, continued to rise. Prices in the three months to September were 6.2% higher than in the same three months last year.
Martin Ellis, Halifax’s housing economist, said: “Housing demand has risen more quickly than supply in recent months, putting upward pressure on prices. Demand has increased against a background of low interest rates and higher consumer confidence underpinned by signs that the economy has begun a sustainable recovery. Official schemes, such as Funding for Lending and Help to Buy, also appear to have boosted housing demand.
“There are signs that supply is beginning to respond to the pick-up in demand, which if continued should help to constrain the upward pressure on prices. The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home, enabling more to put their property on the market for sale.
Levels of housebuilding are also increasing, albeit from a very low base.”
Alexander Gosling, director of low cost online estate agent Housesimple.co.uk, said: “6.2% is a big number and not far off the growth rates we all got used to pre-crash. The property market overall is far stronger than a year ago but if things carry on at the current growth rate then you get the feeling it could backfire.
“When the property market gains momentum, it can easily disconnect from economic reality and before we know it prices are falling again.
“The economy appears to be recovering but is the recovery strong enough to justify the growth we’re seeing in house prices? Hand on heart, probably not. We may still be 1% off the August 2007 peak but then that does not suggest the market has to make up all that ground before it’s potentially overvalued again.
“Consumers, starved of mortgages for so long, are piling back in now that loans are accessible and cheap, but wage growth is still negligible and the economic recovery is far from guaranteed.
“If things carry on as they are then it won’t be very long before many people are priced out. And we know what happens then.”