House price inflation at 13-year high

House prices rose in May at the fastest rate since 1989 - and the market is set to remain buoyant for the forseeable future, according to the latest report.

Nationwide building society reported that UK property prices rose by 2.1% during May, bringing the average house price up to ?102,886. The latest figure means that annual house price inflation has increased to 17.9% - the highest rise for 13 years.

The building society said that the number of houses sold in April was up 27% on the previous year, and that it believes house prices will continue to rise in the next few months as record employment levels and low interest rates fuel consumer confidence.

However, it added that low inflation meant that mortgage repayments as a proportion of pay will not erode as quickly as they did during the 70s and 80s, meaning that house price growth will return eventually to a more sustainable rate of between 4% and 5% a year - although the market's current momentum means this slowdown is still some time off.

"There was no slackening in the demand for property in May," said Nationwide's group economist, Alex Bannister. "The recent increases in approvals for house purchase suggest this strength will persist over the next few months."

The Bank of England is meeting next week to set interest rates for the coming month, amid speculation that they will raise rates in the near future.

A rise in interest rates, and therefore mortgage rates, could spell bad news for those landlords who have stretched themselves financially. A raft of reports in the last few days has shown that the buy-to-let market has become saturated due to a sharp increase in the number of landlords, and that as a consequence rents have fallen for the first time in two years.