Nationwide sounds caution over cooling housing market

Nationwide has described recent house price growth in the UK as "sluggish", reporting an average price increase of just 0.2 per cent in May.

This compares with a similarly slight 0.1 per cent price rise in April but a much healthier 1.1 per cent in March.

It leaves the annual rate of growth at 4.7 per cent for the year to May compared to 5.3 per cent at the end of March.

Although house prices are still some £7,500 higher than this time last year, lower activity over the two-month period was taken as a sign the property market is cooling down, perhaps encouraging investors to look at property abroad for higher returns.

Nationwide group economist, Fionnuala Earley, said there were also other reasons to "expect some cooling" of the property market in the months to come.

In addition to the clear frustration faced by first-time buyers priced out of the property market, she pointed to the threat of future interest rate rises and a drop in approvals for house purchases.

She added that even an "arch-hawk" such as Bank of England governor Mervyn King could not be certain of strong house price growth in the second half of the year.

On the other hand, mortgage approvals hit a high of around 120,000 in December and January, activity not seen since two years ago, "when house price inflation was in double digits".

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