House prices rose by 1.1% in November compared with the previous month and up 7.7% annually, according to figures from the Halifax.
The lender, now part of Lloyds Banking Group, said strong demand for homes combined with low levels of property on the market had pushed up prices. It said that the average home in the UK was now valued at £174,910.
However, the Halifax said that the rate of house price growth would be "constrained" by squeezed household finances.
"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," said Martin Ellis, chief economist at the Halifax.
Lending refocus
The month-on-month rise was the 10th successive monthly increase in prices, according to the Halifax's measure. The three-month on three-month comparison, which represents a more accurate picture of the market as it excludes short-term fluctuations, showed that prices rose by 2.1% in the three months to the end of November compared with the previous quarter.
However, the Halifax said that the UK market had not returned to the levels seen during the housing boom. The average price was still 12% below the August 2007 peak, it said.
In an attempt to ensure that relatively cheap mortgages do not fuel an "overheated" market, the Bank of England is refocusing the Funding for Lending scheme (FLS) on business, not mortgage borrowers.
Under the scheme, banks and building societies were allowed to borrow money cheaply from the Bank of England, as long as they then loan that money on.
At the end of November, the Bank's governor Mark Carney, said that supporting mortgage lending was "no longer necessary".
An overheated housing market would be a risk to the economy, he said, adding that prices were rising in many regions.
The figures from the Halifax are similar to data from the Nationwide Building Society, which recently reported a 6.5% annual house price rise in November.
In real terms, the housing market will by 2018 peak at just three per cent below the heights last seen six years ago, the Office for Budget Responsibility estimated in new figures produced last week.
In affluent London boroughs, house prices are already well above 2007 levels.
The OBR has revised its forecast upwards by some 10 per cent since March, in part because of the projected impact of the coalition’s controversial Help to Buy mortgage scheme. It also warned that its forecast of rising household debt “may pose risks to the sustainability of the recovery over the medium term”.
The OBR’s concern is not that there will be a sudden boom and then bust in the housing market. Instead it fears this year’s rapid rises in household consumption might ultimately lead to a period of belt-tightening that lowers growth.
Nevertheless, the OBR sees the increase in house prices and mortgage borrowing as the flipside of effective monetary policy. It expects rising investment in new properties, home improvements and increasing numbers of transactions.