According to the Nationwide Building Society, UK house prices rose 1.6 per cent in August. This rise is the biggest increase that they've reported since December 2006.

The annual rate at which prices are falling also continued to ease during August, narrowing to just 2.7 per cent, down from 6.2 per cent in July. The Nationwide said prices were now 3.2 per cent higher than at the beginning of 2009 at an average of £160,224, although it added that they were still 14.4 per cent below their peak in October 2007.

Martin Gahbauer, Nationwide chief economist, said: "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008.

"There are two main channels through which the low level of interest rates has impacted the housing market.

"First, mortgage payments for existing homeowners - especially those with tracker or standard variable rate loans - have been reduced substantially."

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