House prices remained steady in February, rising just 4.5% annually to £205,846, according to the Nationwide House Price Index.

The increase is just above the 4.3% annual increase recorded in January.

Values were up 0.6% on a monthly basis, above a 0.2% rise recorded in January.

Meanwhile, separate research by Nationwide shows that cash buyers have become a more important factor in the market.

The lender found that the share of cash transactions increased significantly from around 20% in 2005/06 to around 35% in 2008 and reached 38.9% in the first quarter of 2016.

Robert Gardner, chief economist for Nationwide, said: “The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.

“Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.

“It is interesting that the share of cash transactions has not fallen back as the economy has recovered. Part of the reason is that mortgage market activity has increased only modestly and remains some way below the levels recorded in the mid-2000s.

“The low interest rate environment at home and abroad has also continued to support the flow of cash into other asset classes, including UK residential property.”

Commenting on the house price figures, Jonathan Hopper, managing director of Garrington Property Finders, said: “It’s fast becoming less a battle of wills than a battle of nerves – the uneasy stand-off between cautious buyers and sellers who know they have less competition than usual.

“The acute lack of supply is steadily nudging up average prices, but pragmatic vendors have long since grasped that this is anything but a seller’s market.

“Instead buyers frequently hold the whip hand, bolstered by resilient levels of confidence and sound economic fundamentals; GDP is still growing well, there are record levels of employment and interest rates are barely above their historic lows.

“The result is that despite the continued rise in average asking prices, astute buyers are increasingly able to ask for, and secure, sizeable discounts.

“Buyer confidence is not unlimited, though, and on the front line we’re seeing that buyers, though committed, are highly price-sensitive.”