The index has indicated that prices are up 0.8% month-on-month, the strongest pace since June last year. The figure also signals the strongest start to the year since 2005.

Robert Gardner, Nationwide’s chief economist, said that housing demand remained robust in January, he added that mortgage approvals for house purchase have continued to run slightly above pre-pandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax.

He said: “Indeed, the total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck.

“At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth.”

Discussing market outlook, he continued: “While the outlook remains uncertain, it is likely that the housing market will slow this year. House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable.

“For example, a 10% deposit on a typical first-time buyer home is now equivalent to 56% of total gross annual earnings, a record high. Similarly, a typical mortgage payment as a share of take-home pay is now above the long run average, despite mortgage rates remaining close to all-time lows.

“Reduced affordability is likely to exert a dampening impact on market activity and house price growth, especially since household finances are also coming under pressure from sharp increases in the cost of living.”

Mr Gardner added: “Consumer price inflation reached 5.4% in December, its fastest pace since 1992. This is more than double the Bank of England’s 2% target and inflation is set to rise further in the coming months as the energy price cap is increased. This rapid rise in inflation has been an important factor denting consumer confidence in recent months, especially how people see their own personal financial situation evolving, although as yet, this has done little to dent housing market activity.

“High inflation and growing confidence that the Omicron variant will not derail the wider economic recovery has led to increased expectations that policymakers will increase interest rates further in the months ahead. This will further reduce housing affordability if it feeds through to higher mortgage rates, although to date a significant proportion of the rise in longer term interest rates seen in recent months has been absorbed by lenders.”

Martin Beck, chief economic advisor to the economic forecaster EY ITEM Club, commented: “Although monthly growth in Nationwide’s measure of house prices slowed to 0.8% in January from December’s 1%, it was still strong by historical standards and left annual growth at 11.2%, up from 10.2%. This was the strongest annual growth for the start of the year since 2005.

“But a robust start to the year for house price growth probably won’t prove a taste of things to come. Notably, the stamp duty holiday, which supported housing demand and prices last year, is now in the past.

“To the extent the tax holiday brought forward purchases, its after-effects may drag on housing market activity in the near term. Meanwhile, the prospect of a series of interest rate rises by the Bank of England in 2022, starting with an expected hike in this week’s meeting, will translate into higher mortgage rates. And cost of living pressures faced by households from rising inflation and taxes mean fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates.”

He concluded: “While house price growth will probably cool this year, the EY ITEM Club doesn’t expect any serious correction. The unplanned savings built up by some households during the pandemic will go some way to offsetting the income squeeze. And the growth in popularity of fixed-rate mortgages over the last decade means the majority of existing mortgage holders are protected insulated from increases in mortgage rates in the short term.

“Meanwhile, the more stringent affordability criteria and mortgage regulation introduced during the 2010s mean recent buyers should be better placed to cope with higher mortgage rates than in the past. And the clear message of housing policy in recent years, such as Help to Buy, the stamp duty holiday and the mortgage guarantee scheme, is that policymakers are willing to do what it takes to avoid a significant fall in house prices.”