Nationwide building society's house price index is expected to show a moderate increase of up to 0.5 per cent after remaining flat in January, reflecting other signs of improvement in the market.
The Halifax house price index, due on Monday, is also likely to show a modest rise. This will be the eighth monthly increase running in this widely-used indicator of house prices, although the average price in February probably remained below its level a year earlier.
Optimism that the long-awaited recovery has finally arrived will get another boost within the next week from additional mortgage rate cuts and other loyalty incentives. Other building societies are expected to follow shortly Nationwide's move last week to demonstrate the benefits of remaining mutual by reducing its rates to borrowers.
Skipton and Bradford & Bingley are among the societies likely to announce further moves within the next few days. A Skipton spokesman said: ''There is no question that we will be announcing something. It is only a matter of time.''
Bradford & Bingley led an earlier round in the mortgage war. Bristol & West, Britannia and Yorkshire building societies have also announced discount schemes in recent weeks.
News of the improvement in house prices will follow new figures confirming earlier evidence of a pick-up in activity in January. Adam Cole, an economist at brokers James Capel, said: ''The recovery in the housing market is gathering pace.''
The number of new home loans approved during the month climbed to 80,000 - the highest since December 1994 - according to Bank of England statistics yesterday. Their level was 13 per cent up on last summer's trough. The figure is a good leading indicator of housing market activity.
The value of new loans approved climbed to pounds 4.92bn, up from December's pounds 4.61bn and pounds 4.56bn in January 1995.
Ian Shepherdson, an analyst at HSBC Markets, said: ''Prices and actual market volumes follow behind approvals, so provided the steady momentum shown by these figures continues, things are shaping up for the best spring
house-buying season for years.''
The Bank of England also confirmed the January pick-up in mortgage lending reported by banks and building societies. New loans amounted to pounds 1.32bn in total, the highest since June. This compared with pounds 1.16bn in December and was slightly higher than in January last year. Annual growth in home loans was 4.1 per cent.
Adrian Coles, director general of the Council of Mortgage Lenders, said the year had got off to a positive start. ''Transaction and mortgage activity could improve spasmodically rather than rise steadily for some months. However, as long as confidence continues to strengthen, the housing market should show real improvements during 1996,'' he said. The British Bankers' Association said there had been a modestly encouraging start to the new year.
The positive signals during the past month have led most analysts to predict higher levels of activity and house prices this year, with some arguing that the recovery could turn out to be more dramatic than most people expect.