British house prices rose only modestly for a second straight month in May, the Nationwide Building Society said this morning, warning that accelerating growth in property prices should not be taken for granted.
The 0.2 per cent monthly rise in May, which followed a tepid 0.1 per cent gain in April, cast some doubt on the recent strength in the property market, which most other surveys have chalked up to a revival based mainly in London.
Nationwide's figures stand in sharp contrast to recent numbers for April from HBOS, the nation's largest mortgage lender, which said prices jumped 2 per cent in that month - their biggest monthly rise in two years.
According to Nationwide, the annual rate of increase slipped to 4.7 per cent from 4.8 per cent previously and put the average price of a British home at £164,632 sterling compared with £163,573 in April.
"House prices could be starting to lose some momentum after recent sharp increases," said Howard Archer, economist at consultancy Global Insight.
"(But) it is still very possible that house prices could see further strength in the near term, given that mortgage activity and buyer interest is still relatively high," he added.
Short sterling interest rate futures ticked up shortly after the open this morning. The figures support the view that the Bank of England will not raise interest rates soon and instead leave them steady at 4.5 per cent.
At 8.30am the BoE will publish its latest figures on mortgage lending, consumer credit and home loan approvals, which some analysts expect to moderate a bit from strong levels.
Nationwide said cooling demand for housing as well as rising interest rate expectations in financial markets - which drive mortgage costs as do official interest rates - may dampen property price inflation in coming months.
The building society also said an expected cooling in approvals for home purchase and a pickup in the trend of new sales instructions were reasons for caution on hopes that a revival, driven by London property, will continue.
"Together these point to some loosening in the market over the coming months as supply rises relative to demand," said Fionnula Earley, group economist at Nationwide.
Expectations for higher interest rates have been building in financial markets over recent months, with futures markets factoring in two rate hikes from 4.5 per cent - where they have stayed since last August - next year.
"For now, the effects of hawkish interest rate expectations in the financial markets and press reports pointing toward the possibility of higher rates should contribute to a cooling of house price growth," Ms Earley said.