Data published by Halifax reveals the average price of a house was £208,286 in December, representing a 1.7% increase.
Martin Ellis, Halifax housing economist, said: "House prices in the three months to December were 1.6% higher than in the previous three months.
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"This was the second successive month that this measure has been below 2.0%, indicating a possible slight softening in the underlying rate of price growth."
Newham in London recorded the biggest rise in house prices among major UK towns and cities, with the average price being 22% higher than last year.
However, Mr Ellis added there remains a 'substantial gap' between demand and supply, as the data shows a decrease in the number of properties for sale.
"This situation is unlikely to change significantly in the short-term, resulting in continuing upward pressure on prices," he added.
(LM)
