Prices of homes across Britain rose more than twice as fast as incomes during 2006, ending a brief hiatus in the long-running house-price spiral. Prices appear to be accelerating even though the Bank of England put its interest rates up twice in the second half of the year.

Nationwide calculates that prices rose10.5 per cent this year and that the average cost of a home has increased to £174,000. During 2005, the price of home ownership grew by only 3.2 per cent on Nationwide’s figures. However, the annual rate of house inflation has since accelerated from 4.8 per cent in June and 6.9 per cent in September, before edging up through 10 per cent.

This return to double-digit growth means that the price of a home has risen by more than 10 per cent in seven of the past ten years. For most of that period, prices have risen at least twice as fast as earnings.

After the Bank of England imposed quarter-point rises in August and November, today’s 5 per cent Bank Rate is the highest since 2001.

The Bank’s Monetary Policy Committee is under pressure to raise rates again soon to forestall a price spiral, but MPC members react to asset price booms only if they think they will leak into general inflation.

Fionnuala Earley, Nationwide’s chief economist, said: “Evidence from estate agents continues to show that supply conditions are tight, with fewer sellers coming to market.’’

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