Nationwide's head of research Paul Sanderson said although prices rebounded in May after a particularly weak rise in the previous month, an underlying slowing in the rate of increase since last summer remained in place.

'Disappointing' fall in sales

He said that was in line with expectations and largely reflected less rapid growth in London.

"However, property transactions have also fallen back, with recorded sales in the first four months of the year running more than 6% down on the same period of 1997," Mr Sanderson said in a statement.

The London region has witnessed a slow-down

He said this was "disappointing", and that "although the recent buoyancy of mortgage approvals point to a renewed pick-up in activity, it is now clear that much of the increase in lending volumes can be accounted for by remortgaging."

This point was borne out by figures from the British Banking Association. UK net mortgage lending rose by £797m in April from £458m in March.

But the number of new approvals for loans, or mortgage commitments, fell to 84,471 from 85,122 in March.

Income growth robust

Nevertheless, Nationwide went on to say that it was too early to say the housing market recovery had stalled, with income growth still robust and consumer confidence close to the highs seen during the last boom.

"We expect a slowing in price rises this year to be accompanied by a modest increase in transactions," said Mr Sanderson.

"The possibility of a hard landing for the wider economy remains the most obvious risk to this scenario, whilst sales may also underperform if current supply shortages remain unresolved."