Nationwide - the UK's largest building society, today revealed that this month saw house prices rise again for the fourth consecutive month, as the demand for houses continues to outweigh supply.
The latest figures from Nationwide showed that the average cost of properties increased by 1.6 percent throughout August to £160,224. This increase has lowered the annual rate of price deflation to 2.7 percent compared to last months figure of 6.2 percent.
Nationwide said the value of the average house is now 3.2 percent higher than it was at the beginning of 2009, although this figure is still 14.4 percent lower that when houses peaked in October 2007.
These figures, combined with a wide array of other data, further re-enforces claims that the housing market is emerging from recession, and follows the positive news reported earlier this week that mortgage approvals had seen a significant rise, marking a 17-month high last month.
However, Nationwide stated that the increase in house values was being influenced by the lack of homes currently available on to the market, together with the lowest rates seen in history.
Nationwide's chief economist Martin Gahbauer, said: "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008."
Households are paying substantially less in interest on mortgages as a result of the record low Bank of England base rate, as previously they would have spend around 38 percent of their salaries to service mortgage debt, while now they are paying 28 percent, Gahbauer said.
"The fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell than might have been expected in a recessionary economic background with rising unemployment.
"Partly as a result, fewer second-hand properties have come on to the market than is normally the case in recessions, which has contributed to moving the balance of supply and demand more in favour of sellers over the course of 2009."
Lower rates have also caused providers to cut back on interest paid from savings accounts, but this month has seen some positive signs of recovery in the savings market, as rates on some savings accounts have now reached 3.25% - over 6 times the current base rate, while fixed rate bonds have hit 4.25%.
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