House prices have increased at their fastest pace in almost three years, Halifax reported today.

A 4.6% annual rise recorded in July was the highest increase seen since August 2010, Halifax says.

Between June and July, prices rose by 0.9% to reach £169,624 on average, marking the sixth monthly rise in a row (see our Free House Price Valuations guide).

Halifax housing economist Martin Ellis says: "House prices are expected to continue to rise gradually through this year, with only modest economic growth and still falling real earnings constraining housing demand and activity."

Lenders, surveyors, estate agents and property websites have all been reporting a strong pick-up in activity following the launch of the Government's Funding for Lending scheme a year ago. This has prompted a big increase in mortgage availability and enabled mortgage providers to slash their rates.

Last week, Nationwide reported that prices rose 3.9% year-on-year in July, which was also the biggest annual rise recorded since August 2010. On a month-on-month basis, prices recorded a 0.8% increase between June and July, taking average prices to £170,825 (see the House prices up at fastest rates in three years MSE News story).