Picture used for illustrative purpose.

British house price growth picked up unexpectedly last month, mortgage lender Nationwide said on Tuesday, defying expectations of a slowdown as finance minister Rishi Sunak readies new budget measures to boost the market.

House prices rose 6.9% in annual terms in February from 6.4% in January, Nationwide said, above all forecasts in a Reuters poll of economists that had pointed to a slowdown to 5.6%.

In February alone, prices rose 0.7%, more than reversing a 0.2% decline in January and bucking expectations for a 0.3% drop.

Nationwide said the outlook for the housing market was particularly uncertain right now, with the potential for it to be boosted further by Sunak when he presents his annual budget on Wednesday.

But the market could slow because of a weakening labour market, the lender said.

Sunak looks set to extend a temporary cut to property purchase taxes until June and announce a new mortgage guarantee scheme for first-time buyers, according to media reports.

Samuel Tombs, economist at Pantheon Macroeconomics consultancy, said he doubted any new scheme would solve affordability problems faced by first-time buyers.

“Nonetheless, our forecast for house prices to drop by about 2% this year now looks too downbeat, though we’ll wait for details of the guarantee scheme to be released before providing new numbers,” Tombs said.

Britain’s third-largest homebuilder Taylor Wimpey reported a strong start to the year on Tuesday and forecast a recovery in sales and margins in 2021 after a slump in 2020.

The group also earmarked 125 million pounds ($174 million) for fire safety work on its developments amid a nationwide drive to improve building safety following a deadly tower block fire in London in 2017. The FTSE 100 firm said it expected to develop fewer affordable homes than usual this year, with a higher proportion of more profitable private homes, which would help improve its operating margin. Its shares were trading 2.2% higher.

“The key news is that they are talking better on the operating margin for 2021, recent trade has been resilient ... and all looks in pretty good shape,” said Canaccord Genuity analyst Aynsley Lammin.