UK house price growth was described as “sluggish” in May, according to the Nationwide.

House prices increased by 0.2% during the month causing a drop in the annual rate of house price inflation from 4.8% in April to 4.7% in May.

House prices in the three months to May rose by 1.6% compared with the previous quarter, again, down from the 1.7% rate seen in the three months to April.

Nationwide said that the average house price in the UK is now £164,632, up by £7,500 in the year.

Generally, house prices have been growing, with estate agent sales to stock ratios at a high. A resurgence in London appears to be adding to a positive spell also. But Nationwide did add that the number of house sales have moderated since the start of the year. As a consequence, it is expected that sales will cool further during the summer. Nationwide said that further demand for houses would depend on whether the Bank of England increases interest rates this year.

Commenting on the figures Fionnuala Earley, Nationwide’s Group Economist, said: “The impact of demand will depend crucially on whether the Bank of England actually raises interest rates. In our view, the decision is still very close. On balance, we fall into the ‘no change’ camp along with the majority of independent forecasters.

Furthermore, since the May Inflation Report, Sterling has strengthened, oil prices have fallen back slightly, equity prices have fallen more sharply and long-term interest rates (incl. mortgage interest rates) have risen. These developments all reduce the need for a near-term UK rate hike.

However, for now, the effects of hawkish interest rate expectations in the financial markets on fixed mortgage interest rates and press reports pointing towards the possibility of higher rates, should contribute to a cooling of house price growth.”