Prices of UK property increased by 0.8 per cent in August, according to a Nationwide report, creating a "firm" market for people selling a house in the UK.

The annual rate of inflation stands at 6.6 per cent higher than last year, representing an increase for the third consecutive month.

Fionnuala Earley, Nationwide's group economist, pointed out that this is the fastest annual growth rate in UK property since April 2005 and almost three times faster than at this point in 2005.

"The underlying market remains fairly firm with prices increasing by 0.8 per cent in August. The typical house in the UK now costs £167,221," Ms Earley said.

"This is £10,412 higher than August 2005 – the equivalent of a rise of almost £30 per day."

Nationwide also expects the market to stay fairly healthy for sellers in the near future, despite the fact that it expects interest rates to increase to five per cent before the end of the year.

Among the reasons the lender offers for this prediction are the support that demand from the investment sector will create in the market and the fact that fixed mortgage rates have moved fairly gradually in recent times compared to past examples.

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