House prices were 7.9% higher in February than they were a year ago - the fastest annual rate of increase since October 2007, according to Halifax’s latest house price survey.
In a further sign of a surging housing market, Halifax’s house price index revealed values of property jumped by 2.4% in February alone, the eleventh monthly increase in prices in the past 12 months.
It takes the average price of a home in the UK to £179,872, still 10% below the August 2007 peak.
Stephen Noakes, mortgages director at Halifax, said improvements in consumer confidence, low interest rates and falling unemployment were factors in the increase.
"However, continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices," he added.
"We are also seeing signs of a revival in housebuilding, which should help bring supply and demand into better balance and curb upward pressure on prices over the medium and longer terms."
Nicholas Ayre, managing director of homebuying agency Home Fusion, warned that historic low interest rates could be storing up problems for buyers in the years to come.
"The question is what does this mean for [Bank of England governor] Mark Carney: does he leave things as they are or seek to put some limitations on schemes such as Help to Buy in order to stop prices running away with themselves?" he said.
"The market is not functioning normally because interest rates have had to remain at 0.5% for five years. It is clear that this has been a long recovery and it is not over yet. When interest rates do start to rise, it will cause a real problem for those heavily indebted
homeowners, and will need to be handled with care.”
The survey also found that home sales increased for the ninth successive month to 103,440 in January – 30% higher than it was in January 2013. The number of mortgage approvals also rose by 11% in the three months to January compared to the previous quarter and a huge
42% increase on the same time last year.