Average home insurance premiums have risen 3.5% to £123 in the year to October, according to new analysis from insurance market research firm Consumer Intelligence.

Its data, which is used by the Government’s Office of National Statistics to calculate official inflation statistics, shows the Insurance Premium Tax rise in November 2015 is driving the increases.

However the firm says that “tough competition” means the latest tax rise which came into effect on 1 October 2016 has been largely absorbed.

Its quarterly Home Insurance Price Index shows premiums are rising fastest in Eastern England and are up 6.6% in the past year while increasing the least in the South East at 1.8%.

Homeowners in London pay the highest annual premium of £154 which is 36% higher than the lowest of £113 charged in the South West.

Over-50s homeowners pay average premiums of £131 compared to £119 for the under-50s. Prices are also rising faster for the over-50s at 4.1% compared with 3% for the under-50s.

However, average best-buy prices are still around 9% lower than in February 2014 with customers benefiting from competition among insurers and lower-than-expected claims for flood and storm damage.

Laura Crane, Consumer Intelligence client insight executive, said: “The insurance industry is contributing to a growing economic headache with the Insurance Price Index running massively ahead of Consumer Prices Index.

“However competition for business remains intense resulting in last month’s Insurance Premium Tax rise from 9.5% to 10% largely being absorbed by insurers. Prices are rising everywhere with the over-50s facing the biggest increases and premium increases varying widely around the country.

“Shopping around and haggling with your existing insurer remains important to ensure your premium remains competitive. There are plenty of insurers out there who want to win your business.”

Average premiums and price rises around Great Britain: