Rising interest rates appear finally to be squeezing household budgets, with house price growth slowing across much of the country after the fourth rate increase in a year.

The annual house price growth is now 13.1 per cent, down from 15 per cent a month ago, according to the latest data from Rightmove, but the effect is restricted to parts of the country.

Property prices in the West Midlands fell 2.6 per cent in the month and in the East Midlands 0.2 per cent; but house price growth for the year was at 5.3 and 5.8 per cent respectively. Prices in the South East rose only 0.1 per cent in a month, contributing to an annual increase of 16.2 per cent.

Slower growth in these areas is being masked by the continued outperformance of the London market, up 1.4 per cent to 24.8 per cent in a year – and, this month, markets in East Anglia (1.7 per cent higher, or 15 per cent a year) and Wales (2 per cent higher at 7.4 per cent). The average asking price across the country is now £237,361, up 0.4 per cent in a month.

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The London property market

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No one is suffering as much as first-time buyers

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Background

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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 introduction of home information packs (Hips) has led to an upswing of properties for sale, up 4 per cent on a year ago, as sellers try to avoid the £300plus cost of the pack; but this increase falls far short of the number needed to ease an acute shortage of property for sale.

Experts fear that after the June 1 deadline sellers will avoid going to market, creating a drought of properties and pushing up prices. This week, the Royal Institution of Chartered Surveyors will proceed with a judicial review of the Hips scheme, citing a lack of consultation over its introduction, in an attempt to gain more time. But the Government calls the move “groundless”.

Miles Shipside of Rightmove, said: “The future direction of the market is very hard to read with two external influences. You have Hips artificially increasing the supply of property and, within the same month, a six-year high in interest rates potentially depressing the number of buyers.”

Fears that a postHips shortage of properties might push prices higher will be food for thought for homeowners. Some commentators wrongly predicted a half-point base-rate rise on May 10 and now expect at least one more quarter-point rise. News last week that inflation had eased raised hopes that the Bank of England Monetary Policy Committee would desist from setting higher rates, but further house price rises could dampen them.

Those hoping for slower-growing market can take little comfort from the scale of rises in London. The latest data reported by the estate agent Knight Frank reveals that prices have risen 33 per cent in a year in prime Central London – the fastest rate of growth since 1979 – as a seemingly limitless supply of City and overseas money continues to flood in. Price growth remains strongest for premium properties; homes priced over £4 million rose 11.4 per cent in the first quarter of this year, Knight Frank says, while those under £1 million rose just 6.2 per cent.

Demand for top properties is pushing up prices in neighbouring areas: Camden was one of the high performers, up 5.4 per cent in a month, according to Rightmove. Prices across Kensington and Chelsea rose only 3.4 per cent in that time, although over a year it has been the capital’s star performer, with prices up 75.7 per cent.

Elsewhere in London, lessening affordability is being felt: Hounslow was down 3.3 per cent in a month (19.2 per cent higher in a year), and Lambeth 1.7 per cent lower, or up 29.5 per cent this year.

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