Martin Ellis, housing economist of Halifax, said the 1 per cent increase between November and December was slightly less than the average increase over the previous five months.

Prices increased for the second successive quarter following falls in both the first two quarters of 2009, Mr Ellis added.

Prices in December were 1.1 per cent greater on an annual basis, marking the first increase since March 2008 and house prices have increased by 9.4 per cent since reaching a low in April 2009.

Mr Ellis said: "The significant cut in interest rates following the worldwide financial upheaval in the autumn of 2008 has markedly reduced the burden of servicing a mortgage for many households. This has helped to stimulate housing demand, albeit from a low base.  The recent improvement in the labour market, highlighted by increasing numbers of people in employment in both September and October, has also supported housing demand. The prospects for the market this year will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale. Overall, our current view is that house prices will be flat during 2010."