Conceding that underlying market activity is slowing down and demand is weakening, Nationwide was reported that existing homeowners appear to be in no rush to sell.
However the lender has said that anyone thinking house prices are 'immune' to market conditions is misguided.
The average property price rose by £1,321 between September and October to hit £186,044 - an increase of 1.1 per cent on the previous month.
Fionnuala Earley, Nationwide's chief economist, said that October's increase tied it in with June this year for the highest month-on-month growth rate in 2007.
She said: "While the annual rate of price growth picked up from 9.0 per cent in September to 9.7 per cent, it is still down from a peak of 11.1 per cent in June and was partly driven by base effects. The rise in the annual rate temporarily breaks the slowing in price growth we have seen since June, but is unlikely to mark the start of a new upward trend.
"November and December saw particularly robust gains in 2006, and unless prices perform very strongly for the rest of this year, the annual rate of price growth will resume a downward path."
Strength of house prices masks weakening of market activity
Earley continued: “Most leading indicators of housing market activity are continuing to weaken. Surveyors are reporting the weakest levels of new buyer inquiries in many years and mortgage approvals are falling from recent highs amid weaker demand and tighter lending criteria for riskier borrowers. Slowing demand, however, will not have an immediate impact on prices if homeowners are in no rush to sell.
"New instructions to sell have in fact been falling since May, when there had been a temporary surge of property onto the market. Different factors could be driving the low level of instructions, including a reluctance to trade up amid current uncertainties and the fact that low unemployment is limiting the number of forced sales.
"The overall result is that the stock of unsold homes is still relatively low, and this is providing some residual support to prices. The underlying dynamics of the market, however, are clearly not as strong as this time last year."
Reaction
Robert Bryant-Pearson, chief executive of Allied Surveyors, said: "These figures reflect our experience in that although buyer activity has diminished sharply, this has not been reflected in a glut of properties on the market or in prices diminishing.
"We believe that we shall have a quiet winter but that activity in the spring will bounce back and although prices for some types of housing will fall markedly in some regions, overall prices will rally to see a 5 per cent increase next year."
