UK HOUSE prices rose by 4.2 per cent in May — the biggest monthly rise on record, according to the Halifax House Price Index. The annual rate of house price inflation in the UK is now 18.5 per cent. House prices are being driven up by a combination of low interest rates, low unemployment and supply shortages.

First-time buyers are finding it increasingly difficult to buy property in many parts of the country. This should act as a drag on demand and eventually cause house price inflation to ease. Martin Ellis, group economist, said: "Indicators of housing market activity confirm the buoyant state of the market.

"At 3.7, however, the ratio of house prices in relation to average earnings is well below the peak of 5.0 and only a little above its long-term historical average. This, combined with the low level of mortgage payments as a proportion of income for a typical buyer, demonstrates that owning a home remains an affordable proposition for most people in most parts of the country. It is clear that house prices will not slow as quickly as we predicted earlier in the year.”