UK house prices have risen 3.5% over the last year, taking the cost of the average home to a record high of £195,621.

Official figures released by Nationwide this morning show that prices have risen 0.4% this month, but the annual pace of growth is down on last year.

Nationwide’s chief economist Robert Gardner said: “The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.”

Mr Gardner said that there are signs that the housing market may be “stabilising close to the pace of earnings growth” which has been constant at around 4% a year.

This month’s price index by Nationwide takes into account the effect of stamp duty reforms brought in meaning £275million less tax being paid by home buyers than under the previous system.

Mr Garder estimated that “around 85 per cent of transactions in London, the South West and South East have benefited from the changes, compared with around 55 per cent in the North, Yorkshire and Humberside, and the North West of England.”