British house prices in March marked their strongest annual pace of growth since 2004, data from Nationwide showed.

But he mortgage lender predicted that the market was likely to slow in the quarters ahead as a cost-of-living squeeze takes hold.

UK house prices increased by 1.1% in their eighth consecutive monthly increase in March, Nationwide said today.

Prices were 14.3% higher than their level a year ago, compared with a median forecast of 13.5% in a Reuters poll of economists.

"The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs," Nationwide's chief economist Robert Gardner said.

The average price of a property reached a record high of £265,312 in March.

Gardner said strong labour market conditions and faster wage growth had helped the market, while the significant savings made by households during lockdowns, which he estimated at £190 billion, also helped secure a deposit.

However, data from the Bank of England has showed that mortgage approvals and the value of secured lending were weaker than expected last month in a tentative sign that the housing market might have lost a little of its recent heat.

UK house prices surged through most of the pandemic, as buyers sought more spacious homes during lockdowns, while tax breaks and historically low interest rates also helped.

Those catalysts, however, are slowly fading.

"We still think that the housing market is likely to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high," Gardner said.

"Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates," he added.