LAST year the price of a typical house increased by the equivalent of £45 a day, which is three and a half times faster than the £12.50 a day of 2005, bringing the price of a typical house up to £173,746.

And the housing market increased by 1.2 per cent in December 2006, bringing the annual growth rate to 10.5 per cent, the first time it has hit double figures since February 2005.

The figures are from the Nationwide which also predicts that stable interest rates and supply constraints will underpin the market in 2007 and house prices will increase between five and eight per cent.

"Both housing market and weather forecasters were surprised by the warm climate last year," said Fionnuala Earley, Nationwide’s group economist.

"Although the temperate weather is likely to have played only a minor role, the housing market clearly warmed up during 2006 and house prices increased three and a half times faster than 2005 and returned to double digits for the first time since February 2005."

This increase was much higher than the widespread expectation of this time in 2005, that annual house price growth would be in the low single digits.

"There are still few signs that the rate of house price growth will moderate in the very short term," Fionnuala Earley added.

"Evidence from estate agents continues to show that supply conditions are tight with fewer sellers coming to market. The stock to sales ratio – a good indicator of house prices – has continued to increase suggesting a few more months of firm price growth.

"However, we expect worsening affordability and recent interest rate hikes to affect the levels of activity in the market in coming months. This will feed into a slower rate of house price growth in the second half of 2007.

"The number of estate agents reporting an increase in new buyer enquiries fell back sharply in November and while this is a more volatile indicator of house purchase approvals, it does lend some support to the view that we will soon see the start of some weakening in demand."

House price growth is expected to remain relatively robust between five and eight per cent as the momentum that gathered in 2006 continues to flow into the early part of this year, helped by a buoyant economy, stable interest rates and a continuing shortage of housing supply.

However, Nationwide forecasts increasingly poor affordability. The impact of higher mortgage rates and likelihood that fewer parents will be willing or able to help out their children will mean the rate of house price growth slows to single digits in the latter part of the year.