Mortgage Rules 'Hit Housing Market Activity'

UK house prices have risen for the thirteenth month in a row but activity may be slowing as greater restrictions are placed on mortgage lending.

The findings, released by Nationwide in its monthly house price index, recorded a 0.7% increase in average prices in May.

Nationwide said it meant that the annual pace of price growth edged up to 11.1% from 10.9% the previous month - its strongest level since June 2007 - with first-time buyers driving the recovery.

The report was released against a backdrop of fierce debate about whether the market is overheating - particularly in London.

Mr Cable will hold talks with housebuilders on Tuesday

Sky News learned on Monday that the Business Secretary Vince Cable and the Chancellor were separately to meet the bosses of major building firms this week over the continuing problem of historically low supply failing to meet the need for new homes.

Separate figures released on Tuesday morning also raised fears the housing industry was struggling to rebuild itself in the wake of the financial crisis to match demand, with activity in the construction sector measured by Markit at a seven-month low in May.

The European Union also called on the UK to build more properties to help stabilise the market.

Nationwide said it believed the biggest factor behind the steep rise in property prices was the improving economy.

Its chief economist Robert Gardner said: "There have been tentative signs that activity in the housing market may be starting to moderate, with mortgage approvals in April around 17% below January's high.

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

"The slowdown may partly be the result of the introduction of Mortgage Market Review (MMR) measures, which may take a few months to bed down.

"The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer.

"However, with mortgage rates close to all-time lows and labour market conditions continuing to improve, underlying demand for homes is likely to remain strong."

Nationwide believed first-time buyers were driving the recovery, though the controversial Help to Buy scheme was unlikely to be the biggest factor behind the surge.

Mr Gardner continued: "First-time buyers accounted for 48% of house purchase activity in March, a record high well above the long run average of 38%.

"Data from DCLG suggests that the Help to Buy scheme is providing support to first time buyers, who accounted for over 80% of Help to Buy loans to date.

"However, the modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market."

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