Annual house price growth increased to 3.7% in August from 3.3% in July, the Halifax House Price Index has found.
On a quarterly basis prices have increased by 1.9%, with average prices standing just shy of £230,000.
Russell Galley, managing director, Halifax, said: “While the pace of employment growth has recently slowed, a low unemployment rate and a gradual pickup in wage growth are helping to support household finances.
“This has been accompanied by interest rates still remaining at a historically low rate and a stable, yet constrained, supply of new homes onto the market further supporting house prices.”
Ewen Bunting, head of sales at independent estate agents James Pendleton, attributed the rising house price growth to low housing supply.
He said: “The housing market’s iron lung of low supply is at play here.
“The number of homes for sale just can’t muster the strength to get off the pavement and into the lobby, let alone the lifts.
“It doesn’t matter that affordability for most is pushing the limits of common sense, when borrowing is dirt cheap, people still need to move and are still climbing over each other to do so in some instances.
“That’s most true of first-time buyers, whose activity is not far off its pre-crisis peak.”
He added: “It’s the government’s artificial demand-side stimulants, namely the Help To Buy Scheme and stamp duty relief for first-time buyers, that are causing the annual growth rate to power on at this level.
“In a world that made sense, more people would talk about the housing crisis and the can being kicked down the road, particularly in the face of Brexit jitters.
“There was a spasm in the market around the time of the referendum but we’re increasingly seeing a return of that reluctance to transact as we get closer to leaving, so we’d expect the volume on that to dial up before the end of the year.”
Alan Collett, fund manager of the TM home investor fund, highlighted the regional differences in house price growth.
He said: “Our experience agrees with the Halifax data, with independent valuations of our properties showing house prices across the UK remain stable.
“However, there are regional variations. The current economic and political uncertainty having less of an impact in areas where house prices have kept in line with wages and we have already seen increases in the value of some of our recently acquired properties in the Midlands and East of England.
“Even in London, which has shown low and even negative house price growth over the past few months, the picture is mixed across the capital, with our properties in the Wembley Park regeneration area maintaining their value and two recently selling at or above the independent valuation figure.
“With continued strong demand for well-managed rental homes nationwide, we are confident the outlook for long-term investors in residential property remains positive.”