House price growth could reach 10% during the year – provided current growth continues, Nationwide Building Society has reported.

Nationwide’s January house price survey reports that average UK house price rose by 1.2% in the first month of 2010, pushing the annual rate up to 8.6%.

It means the average UK home now costs £163,481.

With the UK now emerging from recession, Nationwide has said the recent economic news has been a mixed bag. Unemployment figures are starting to reduce, however with many employees having taken a pay cut of a pay freeze, housing affordabilty becomes worse as house prices rise while wages remain static.

Martin Gahbauer, Nationwide’s Chief Economist, said: “House prices strengthened their upward momentum at the start of 2010, increasing by a seasonally adjusted 1.2% month-on-month in January. The 3 month on 3 month rate of change – usually a smoother indicator of the near term trend – dipped slightly from 2.3% in December to 2.1% in January, but this primarily reflects the smaller price increases recorded in November and December.

At £163,481, the average price of a typical UK property cost 8.6% more than a year earlier in January, up from 5.9% in December. 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.