UK house prices rebounded in November at the fastest pace of annual growth in two years, according to data from lender Nationwide.
House prices rose 1.2% month-on-month, helping the annual growth rate rebound to 3.7% from 2.4% in October.
This was the biggest annual jump since November 2022 and brings house prices to just 1% below their all-time peak.
A 0.2% monthly rise and 2.4% annual increase had been expected by economists, according to a Reuters poll.
"The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels," said Robert Gardner, Nationwide's chief economist.
The upcoming expiry of the temporary increase in stamp duty thresholds in March is not the likely cause, he argued, since the majority of mortgage applications began before Rachel Reeves' Budget announcement.
Gardner says housing market activity has "remained relatively resilient in recent months", with mortgage approvals approaching levels seen pre-pandemic, despite the higher interest rate environment.
"Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year.
"Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s."
The stamp duty changes are likely to provide an incentive for buyers to bring forward house purchases, causing a jump in transactions in the first three months of 2025, he said, bringing a corresponding period of weakness through to June or even September, as was seen with previous stamp duty changes.
Ruth Gregory at Capital Economics said the surprisingly large rise "suggests the housing market is picking up momentum despite recent rises in mortgage rates".
She said: "With affordability still stretched by past standards, we doubt the recent strength in house prices will be sustained over the coming months.
"Even so, November’s rise means that barring a fall in prices in December, annual house price growth is on track to rise by 3.2% y/y in Q4, above our forecast for a 2.5% y/y gain in Q4.
"And we still think a bigger fall in mortgage rates than other forecasters are expecting will mean that house prices receive more enduring support next year."
Matt Swannell of the EY ITEM Club agreed that even though markets expect fewer interest cuts than they had before, which is likely to feed into slightly higher mortgage rates over the coming weeks, "the housing market recovery still looks set to continue in the short term".
"However, the sensitivity of demand to mortgage rates means that higher interest rates could dampen activity slightly."
Beyond the next few months, he expects the Bank of England to lower interest rates "relatively slowly" through 2025, settling above pre-pandemic levels.
"With housing valuations remaining quite high, this will likely lead to only a gradual improvement in the housing market."