House price growth rose to a three-year high during February Hometrack has said, as supply shortages compensated for increased borrowing costs.

The average property in England and Wales was worth 6.4 per cent more than 12 months previously, the highest figure since June 2003.

Over February, the average price rose 0.7 per cent, the highest one-month gain since May 2004, reaching £172,000.

“House prices look set to increase further,” said director of Hometrack Richard Donnell.

“Despite the January rate rise, it seems that a lack of supply is continuing to support higher prices, primarily in London and the south east.”

The survey found growth in all ten regions with the highest results seen in London, with prices up 1.3 per cent.

Overseas demand and city workers flush with an estimated £8.8 billion in seasonal bonuses have helped sustain the top end of the market in the capital.