UK house prices 'up 0.7% in May'

House prices rose by 0.7% in May, the Nationwide says, but there are signs that activity in the housing market may be "starting to moderate".

May's increase compares with a 1.2% rise in prices during April.

However, the annual rise in house prices edged up to 11.1% from 10.9% and Nationwide said there was steady demand from first-time buyers.

Nationwide added that a government mortgage scheme seemed to have played little part in house price growth.

The average UK property price is now £186,512, the building society said.

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There have been "tentative signs that activity in the housing market may be starting to moderate," Nationwide chief economist Robert Gardner said, with the number of mortgage approvals in April down 17% from January.

"It is too early to say whether nationally this is indicative of a cooling trend in the wider market," he added.

The May slowdown could be linked to the introduction of tougher questions in the mortgage application process, he said

The new measures require mortgage lenders to test buyers more strictly about whether they can afford mortgage repayments, including under the scenario of rising interest rates.

Despite more stringent mortgage lending rules, demand from first-time buyers was "playing an increasingly important role in the housing market", Nationwide said.

In March, first-time buyers "accounted for 48% of house purchase activity".

Help to Buy impact

Nevertheless, the government's Help to Buy scheme, which is designed to ease first-time buyers into the housing market, was not a major factor in price rises, Nationwide said.

In the first quarter of the year Help to Buy mortgages accounted for 9% of total mortgage completions.

In London, which saw the fastest house price growth in the quarter, Help to Buy accounted for around 4% of mortgage completions, Nationwide said.

"The evidence suggests that higher priced areas have been seeing the largest percentage increases in house prices, especially in London and the South East.

"But the majority of Help to Buy loans have been on transactions where the property values are below the national average," Mr Gardner said.

Critics have voiced concerns that the government mortgage guarantee could contribute to a UK housing bubble.

However, last week Graham Beale , the chief executive of Nationwide, said that the housing market could be facing a "natural correction" and warned that there was a "slowing down in the market place", particularly in London.

UK house prices 'up 0.7% in May'

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