A rapid rise in UK house prices in December will increase pressure on the Bank of England to increase interest rates this week, economic analysts are warning. House prices rose at their fastest rate in the last two years according to the housing index released yesterday by British mortgage lender Halifax.

During 2001, house prices in the UK rose by 15.5 per cent according to the bank. Halifax, which has more than a quarter of the home mortgage market in the North, said UK house prices rose 2.9 per cent in December.

Figures to be released this week are likely to show this increase was not mirrored across the country, with some regions including Northern Ireland reporting slower growth.

A similar survey published by Nationwide building society last week showed house prices had risen in the North last year by 3.5 per cent, compared to a UK average increase of 13.8 per cent.

According to Mr Gary Styles, head of group economics with Halifax, house price inflation in the UK has remained strong, rising from 3-4 per cent at the beginning of the year.

Industry leaders in the North have warned that any increase in current interest rates would further undermine business confidence in the region.