House prices rose by just 0.5 per cent this month in a sign that four sets of interest rate rises are beginnning to hit borrowers appetites', according to the latest survey from Nationwide, the mortgage lender.

Uncertainty over whether the Bank of England is preparing to take interest rates as high as 6 per cent is also acting to dampen the market, Nationwide said.

This came as official figures from the Bank of England showed that loans approved for mortgage purposes fell to 107,000 in April, down from from 113,000 in March. Alongside April last year, this ranks as the lowest month for mortgage approvals since September 2005, economists said.

However, Nationwide still pointed to a "stubbornly" high annual growth rate in house prices of 10.3 per cent in May, its highest for five months.

Expert View

There is no doubt the British property market is slowing, thanks to four interest rates rises over the past 12 year

Peter Conradi

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Housing costs taking their toll

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash?

The lender had reported that house prices gained 0.9 per cent in April.

Howard Archer, the chief UK and European economist at Global Insight, said the lender's survey showed that the underlying trend in house price growth had softened and the market "will lose buoyancy gradually over the coming months".

He added that this month's 0.25 per cent interest rate rise would add to affordability pressures and said Global Insight still believes that borrowing costs have further to rise.

In a further sign that house prices are cooling, Nationwide said its running comparison of three-month price growth rates fell to 1.8 per cent in May, its lowest level since August last year.

A flood of properties rushed on to the market ahead of a June deadline for compulsory Home Information Packs (HIPs) could put some further pressure on prices, Mr Archer said. The June HIPs deadline was last month put back to August.

Today's monthly survey from Nationwide follows a report by Rightmove showing that a record 200,115 houses were put up for sale in the month to the middle of May.

"This could well have some dampening impact on house prices in the near term at least, although it remains to be seen how housing supply will be affected by the now somewhat confusing situation over HIPs," Mr Archer said today, although he said there remained a shortage of property.

Fionnuala Earley, chief economist at Nationwide, added: "Whether the implementation of HIPs in August will lead to a severe reduction in instructions [for estate agents to market properties] is unclear. Given that the cost of a HIP is estimated to be around £500, the cost itself is not likely to be a big disincentive to sellers who wish to market their property seriously."

Natiowide, which reckons the price of a typical house is £17,000 higher than this time last year, is among several lenders predicting that Britain's storming housing market will slow during the second half of the year.

Last December, Nationwide predicted house prices would rise by between 5 per cent and 8 per cent this year. Last month , it reiterated the assertion.