House prices are rising at their fastest rate since October 1999, according to figures produced by the Halifax.
Britain's biggest mortgage lender said the leap of 2.9 per cent showed consumer confidence had bounced back after the September 11 suicide attacks.
The figure brought overall house price inflation for 2001 to 15.5 per cent.
But the group warned increases would slow as delays in economic growth and rising unemployment took their toll on the market.
Gary Styles, head of group economics at Halifax, said: "The housing market has shown remarkable resilience.
"Slowing economic growth and rising unemployment should help ease house price inflation to more moderate levels."
He added there was a shortage of first-time buyers in some areas and affordability was beginning to be an issue, despite mortgage rates being at their lowest level for more than 40 years.
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