According to the final quarterly figures for 2001 house prices are still rising, marking "the strongest year in price growth since 1988."

The growth in prices comes after considerable upheaval throughout the year, from foot and mouth disease to the slowing world economy.

Publishing the figures, Nationwide said that the key to the rise has been a benign economic backdrop, the lowest unemployment since 1975, the lowest mortgage rates since the fifties and the fastest growth in real take home pay since 1988. It said that homeowners took advantage of these conditions to push remortgaging to record levels last year.

Alex Bannister, Nationwide's Group Economist, Finance and Planning predicted that next year will see higher unemployment and a weaker economy, but forecast that Britain should avoid recession. He said: "We expect UK prices to rise by 6 per cent next year, with the slowdown in price growth more pronounced in London and parts of the South East."

"House sales will be held back by fewer first time buyers and owners trading up," added Bannister.