Robert Bryant-Pearson, chief executive of Allied Surveyors, said: “The recent cut in interest rates with more to come will ease the pain of mortgage costs for the majority. Well-located family homes in the middle market will continue to enjoy healthy demand. We have been witnessing a blip, not the first wave of a disaster.”

Property investment expert David Austin, managing director of Property For Life, identified hotspot areas for 2008 along the M4 corridor, including Reading, Swindon and Bristol, along with Southampton and Middlesbrough as ripe for investment. “Demand for properties will be as strong as ever,” he said.

Nationwide’s survey of 30 towns and cities found almost one third of the areas experienced double-digit house price growth this year, compared with the 4.8 per cent UK average.

St Albans was officially named the country’s most expensive location. Average house prices in the Hertfordshire city rose 13 per cent to nearly £350,000. Prices in the former Roman outpost – just outside the M25 and within easy commuting distance of London – rose by £112 a day over the year.

Five other towns and cities broke through the £300,000 average price barrier – with Belfast (up £201 a day), Oxford, London, Brighton and Cambridge joining St Albans.

Fionnuala Earley, Nationwide’s chief economist, warned: “House price growth recorded another strong year in 2007, but the national figures disguise movements in different parts of the country. Our survey shows how wide the disparities across the country can be.”

The Bank of England is widely expected to make a series of interest rate cuts in 2008.

Analysts predict rates to drop to 4.5 per cent or possibly lower.