House prices rose at the highest rate for five months in January and consumer confidence rose more than expected.

The Nationwide building society said house prices rose by 1.2% per cent this month, more than twice the 0.5% gain seen in December and the biggest advance since August.

The market had forecast a 0.3% rise on the month.

It took annual house price inflation to 8.6% from 5.9% last month, the highest since October 2007 and following double-digit declines in many months last year.

"Unless there is a fall in property values in February, annual house price inflation is likely to move into double-digit territory next month for the first time since May 2007," said Martin Gahbauer, Nationwide's chief economist.