UK house prices rose in the last month of 2001 at their fastest rate for two years, the country's biggest mortgage lender has said.

The price of a UK home rose by 2.9% in December, HBOS, which includes the Halifax Bank, reported.

Year on year, the rate of increase hit 15.5%. In January 2001, the yearly rate of house price inflation had amounted to less than 4%.

"House price inflation has been very strong in 2001," Gary Styles, head of group economics, said.

The Halifax said the rise reflected a "bounce back in confidence from the lows in the aftermath of September's attacks in America".

The report, which follows other evidence of a resilient property market, will fuel fears of a rise in UK interest rates.

Coming slowdown

The figures follow data from the Nationwide showing that UK house prices grew more quickly last year than at any time since the 1988 property boom.

The Nationwide estimated last year's overall rise at 13.8%, with prices edging 1.9% higher in December.

But the Halifax echoed Nationwide predictions that price growth would calm in coming months.

"Slowing economic growth and rising unemployment should help to ease house price inflation to more moderate levels over the course of 2002," Mr Styles said.