Britains housing market is in the grip of a spring boom, the country's biggest building society has said. Nationwide said the average price of a home has shot up by 1.1% to £162,083 in March after stagnating in February. The fresh surge has pushed the year-on-year rate of increase up to 5.3%, the strongest for 10 months.

Despite last year's sharp slowdown, prices now stand more than £8,000 higher than 12 months ago - the equivalent of a rise of £22 a day.

Nationwide's group economist Fionnuala Earley said: 'The housing market seems to have shrugged off bad news about job losses and downside risks to economic growth. 'The pick-up in prices in March continues the upward trend we have seen since the autumn, which has been supported by a solid return of buyers.'

But Earley warned the market's strength was unlikely to be maintained as would-be homebuyers become increasingly financially stretched.

She said: 'Utility and council tax bills are rising and, on top of this, affordability continues to be squeezed as house prices rise further. 'Even in a market with historically low interest rates and competition beating borrowing rates down further, there is a limit to the proportion of income that borrowers will feel comfortable spending on their housing.'

Mortgage approval figures from the Bank of England yesterday provided the first clue of slower times ahead.

Approvals - loans agreed but not yet made, and regarded as a good indicator of future housing activity - fell in February for the first time in 16 months.

Nevertheless, there is little doubt the market is in good shape for now, with London leading the charge. Record City payouts have boosted prices in the central 'bonus belt' of Westminster, Kensington & Chelsea and the City, and lifted the cost of a terraced house above £1m for the first time.

Earley said only about 30,000 homeowners nationally would benefit from last week's Budget stamp duty change, with raised the starting-rate threshold from £120,000 to £125,000. She said: 'Given the variation in house prices across the regions, far fewer first-time buyers in the South, where affordability is more stretched, will benefit from the change.'

Copyright © 2005 First Mortgage Trust