On a month-on-month basis house prices were up 1.8% in May, down from the 2.3% rise recorded in April.
Annual house price growth was up 10.9% in May, the highest level in nearly seven years, the latest Nationwide house price index has revealed.
On a month-on-month basis house prices were up 1.8% in May, down from the 2.3% rise recorded in April.
The figures leave the average price of a home at a new record high of £242,832.
Robert Gardner, Nationwide's chief economist, said: “Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs, improving credit availability and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic, as highlighted above.
“With the stock of homes on the market constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.
“Further ahead, the outlook for the market is far more uncertain.
"If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said he expects prices to keep rising.
He said: "Although we may have been wondering if the glorious sunshine was ever going to arrive, the continued upwards trajectory of the property market comes as no real surprise. Buyers wanting more space, trying to take advantage of the extended stamp duty holiday and the lack of supply, are all pushing values upwards.
"Lenders retain a strong appetite to lend with increased price competition leading to lower rates. Platform is launching the cheapest ever two-year fix this week, pegged at just 0.95%.
"Rates this low will continue to support the market, while the increased availability of low deposit mortgages will assist first-time buyers who are finding rising house prices increasingly difficult to deal with.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: ’These figures, though strong and coming on the back of last month’s fastest monthly rise since 2004, reflect market activity in the last few months when prices were turbo-charged by the extension of the stamp duty holiday, as well as continuing shortage of houses in particular, low mortgage rates and faster vaccine rollout.
"Looking forward, these factors aren't likely to change anytime soon, even if demand cools a bit, which we are already starting to see. As a result, prices will soften but not correct and next month’s index is likely to show strong but more moderate growth."
