Official figures show annual price growth in the housing market rose at its fastest level for more than two years in June.

In the 12 months to the end of the month, property prices increased by 12.1%, the greatest annual increase since March 2005, according to the Department of Communities and Local Government.

On a monthly basis house price growth more than doubled in June, with prices increasing by 1.6%, compared with a 0.7% increase in May.

The new figures put the average cost of a home in the UK at £214,222.

But the research is in marked contrast to other indexes which suggest the housing market is slowing down as higher interest rates begin to take effect.

Howard Archer, chief UK and European economist at Global Insight, said: "There is no denying that the DCLG house price data is markedly stronger than expected, and suggests that the housing market is proving resilient to higher interest rates."

However, he added that the department's figures have a tendency to be behind other indexes. Nationwide, Rightmove, Hometrack and the Royal Institution of Chartered Surveyors have all published figures for July suggesting the market is beginning to slow down.

Mr Archer said: "The overall impression that we get from the very latest data and survey evidence is that the housing market has peaked and is gradually and erratically coming off the boil.

"Furthermore, there is still a very real possibility that interest rates will rise by a further 25 basis points to 6% in the autumn, which would heighten affordability pressures."

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, said: "Although house price inflation accelerated more than expected in June, recent interest rate rises will gradually sap momentum from the residential property market.

"Employment is key for the housing market going forward. Despite the pain of higher borrowing costs for an increasing number of homeowners, labour demand will remain generally firm helping to support a soft landing for residential property."

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