The housing market is re-igniting, according to the latest house price data from Nationwide. January saw house prices rising by 1.4%, the largest monthly increase since July 2004 according to their new figures, and almost triple what was expected.

Annual house price inflation jumped from the 3% mark in December to 4.4%, a clear indicator that the market is continuing to improve. Nationwide attributed this rise to the interest rate cuts of last August, pointing out that the average UK house price has now risen from £151,757 to £158,478.

Fionnuala Earley, Group Economist for the mortgage lender, said today: ?The housing market got off to a strong start in 2006 and confirms the strengthening trend we have seen since October.?

Despite acknowledging that the national housing market has stepped up a gear of late, Ms Earley predicts that subdued market activity and strained affordability could make it difficult for the renewed strength to be maintained.

?The key question for the market is whether the strong pickup over the last 4 months will persist,? she commented, adding that while the UK economy seems to be recovering, 2006 is still likely to produce below-trend growth.

Meanwhile Savills is confident that the prime property market will lead the mainstream markets this year. ?According to Savills prime property market indices, values in the prime central London residential markets rose 4.5% over the whole of 2005, outperforming the mainstream housing market,? commented Harriet Black, Associate at Savills Research, ?In 2006 we expect both the prime central London and the prime country house market to outperform the mainstream national market?.