The pound has been tipped to rise this week on a report showing that house price inflation this month has risen by the fastest rate for two years.

Sterling was trading at $1.8944 early on Monday from $1,8946 on Friday, while one euro was worth 67.74p on the currency markets from 67.69 last week.

The Rightmove house-price survey showed that annual property price inflation reached 12.4 per cent in November, fuelling speculation that interest rates would rise again.

Analysts said that the pound could rise to $1.94 by the end of 2006 and as high as $1.96 by the end of March 2007.   

"The housing numbers are healthy and there's nothing to make us concerned," Marios Maratheftis of Standard Chartered in London told Bloomberg.

Others predicted that borrowing costs would reach 5.25 per cent in February 2007 and fall back to 4.75 per cent in February 2008.