House prices in the UK were 9.4 per cent higher in February than a year ago as the sector goes from strength to strength, according to Nationwide.

It represents the strongest rate of annual growth since May 2010 and means house prices are now only three per cent behind their 2007 peak.

The average price of a property in the country now stands at £177,846, up slightly from January’s figure of £176,491, and it demonstrates how confidence is now flooding back into the market.

Robert Gardner, Nationwide’s chief economist, is glad to see house prices have now increased for 14 consecutive months.

“Demand continues to be supported by record low interest rates, improved credit availability and rising consumer confidence thanks to the healthy gains in employment recorded in recent quarters,” he added.

Mr Gardner pointed to the constrained supply of housing as one of the main reasons prices are continuing to rise and this situation is expected to continue as housing completions are still well below their pre-crisis levels.

In April, the Mortgage Market Review will also come into force, which will see lenders made to carry out more stringent affordability checks before agreeing to grant loans to customers.

There has been a lot of talk recently about the impact of cash buyers on the market and Nationwide’s analysis shows the share of cash transactions has increased significantly from around 20 per cent in 2005-06 to around 35 per cent.

According to Mr Gardner, adverse labour market conditions and the tightening of credit conditions after 2008 are responsible for this rise.

The government is keen to encourage as many people onto the property ladder as possible and the number of homeowners who have been helped to buy or reserve a home since 2010 is around 112,000.

“Both buying and building are at their highest levels since 2007, underpinned by our action to cut the deficit and keep interest rates low,” said Eric Pickles, communities minister.