Residential property prices rose again in February despite higher mortgage rates and a sharp jump in inflation to increase the most in cash terms since 1991.

This is the seventh consecutive month of property price growth, fuelled primarily by a shortage of homes for sale.

Prices of the average home increased by an annual rate of 12.6% in February, up from a record January rise of 11.2%, to hit £260,230, said Nationwide.

The price of a typical home is now £29,162 more than a year ago – the largest year-on-year hike ever recorded by the lender.

Robert Gardner, Nationwide’s chief economist, said housing market activity had remained robust over the past few months, with mortgage approvals continuing to run above pre-pandemic levels at the start of the year.

He said: “A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.

“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.”

The month-on-month increase in residential property prices for February was 1.7%.

The average price of a home in the UK is now £260,230 – and has increased more than £44,000 since February 2020, before the start of the pandemic.

Gardner added: “The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.”

Industry reaction to the latest Nationwide House Price Index:

Tom Bill, head of UK residential research at Knight Frank, said: “I don’t expect a return to more muted house price growth until supply picks up and there are signs of that gradually happening While demand has been unrelenting over the last several months, higher levels of market valuations requested by prospective sellers since the start of the year indicate that supply will pick up, particularly as the spring market arrives. We would therefore expect price growth to return to single digits later this year.

“Meanwhile mortgage rates will inevitably rise and higher inflation, accelerated by the effects of the Ukraine conflict, will start to put downwards pressure on demand and house prices. While the Bank of England may adopt a more risk-averse approach to raising the base rate given the geopolitical uncertainty, mortgage rates are still playing catch-up and lenders are likely to keep withdrawing their best products.”

Jason Tebb, Chief Executive Officer of OnTheMarket, commented: “Positive buyer sentiment remains, with annual house price growth rising to 12.6 per cent in February, the strongest pace of growth since last June and a typical home is now 20% higher than in February 2020.

“The ‘new normal’ is undeniably calmer than the frenetic market conditions we saw last year but is still an elevated, faster-paced version of what we saw before the pandemic. There might not be a queue of 30 people out of the door for every property but there’s still a large number of highly motivated buyers, keen to move and competing with each other for a small number of available properties.

“Although new stock levels are rising as we head into spring, unless buyers are organised and prepared to be decisive when it comes to securing a property, they may well miss out.

“Although the suburbs remain a popular choice, the volume of buyer enquiries for areas such as Richmond or Kew has remained at last year’s levels. If 2021 was defined by a race for space and people moving out to the suburbs, 2022 is seeing an absolute boomerang effect with house hunters rushing back into the capital; a change in buyer behaviour that has been accelerated by the return of office workers and international travellers.”

Michael Bruce, CEO and founder of Boomin, said: “We’re riding a wave of house price growth at present, driven by a market that is experiencing very high demand for homes that just simply aren’t available. It’s only natural that this wave will start to lose ferocity at some point, but there’s certainly no signs of that happening just yet, despite a squeeze on the cost of living and a double-digit increase in interest rates.”

Guy Gittins, CEO of Chestertons, commented: “London is seeing a substantial uplift in buyer demand – well beyond the previous record numbers of last year. Comparing February 2022 vs 2021 buyer enquiries are up 36% whilst the number of properties for sale is down 11%. With house prices being dictated by supply and demand, and the number of property buyers being at an all-time high, the capital’s average property price has increased by 7% for the same time period.”

James Forrester, managing director of Barrows and Forrester, James Forrester, commented: “Yet another increase in property values demonstrates the current strength of the UK property market and the deafening silence coming from the usual band of property market naysayers is no better testament to this overall health.

“Despite many prophesying the end of the market due to Brexit, the pandemic and the end of the stamp duty holiday, amongst other things, we’re yet to see a ***** appear in the armour of what is perhaps the most defiant and dependable property market in the world.”

Simon English, a specialist buying agent, said: “Last month, demand for family homes across the home counties has remained as strong as it was during the peak of the pandemic. The areas of South West Surrey, Hampshire and West Sussex have thereby seen particularly high volumes of enquiries, which has led to competitive bidding among buyers. That competitive bidding has often led to a best and final offer scenario with agreed prices on many occasions achieving more than 10% above the price being asked.

“Following last year’s unprecedented rush of London families securing larger properties across the home counties, the regional housing markets are now seeing up to 50% fewer homes for sale. With demand still outstripping supply, vendors wanting to sell this year should consider selling their home sooner rather than later in order to achieve their target asking price.”