House prices in the last quarter were 1.9% higher than in the previous three months, according to the latest Halifax House Price Index.
Martin Ellis, housing economist, said: “The signs of improvement in the housing market towards the end of last year continued in January.
“Prices in the three months to January were 1.9% higher than in the previous three months; the strongest figure in this measure of the underlying trend for three years. Prices were also 1.3% higher than in the same period a year ago, marking the first annual rise for 27 months.
“Market activity has also improved with sales in 2012 at their highest for five years. Rising mortgage approval numbers point to further increases in home sales in the coming months.
“The Funding for Lending scheme has helped lenders to lower interest rates and improve availability in the past few months. This is likely to have been a factor contributing to the pick-up in both home sales and prices.
“The outlook for the UK economy and house prices, however, is more unclear than usual. Subdued economic growth and pressures on household finances are expected to constrain housing demand. Overall, we expect continuing broad stability in house prices nationally in 2013.”