The Halifax said that the average price of a house was £165,528, which is still 4.7% lower than October last year. Since the spring house prices have been recovering from the sudden slump caused by the international credit crisis.

The Halifax said prices were rising because of a combination of increased demand and fewer houses for sale. "Nationally, house prices have risen by 2.9% since the end of 2008 [and] they are now 7.1% higher than six months ago when prices reached a trough in April," said Martin Ellis, the Halifax's housing economist.

"Demand for houses has risen in recent months due to the very low level of interest rates, the decline in property prices since the summer of 2007 and a pick-up in consumer confidence on the back of better economic news," he added. House sales seem likely to continue rising in the coming months.

Figures published by the Bank of England last week showed that the number of mortgages approved but not yet lent - a key indicator of future sales - rose by 3,000 in September to 56,000. That was their highest level since March 2008.

The figures suggest that if increased demand for home loans is combined with a continued lack of choice for buyers, then house prices may keep on rising too.

LATEST NEWS