Lowest number of homes on the market for years is driving house prices - Halifax

The news came as the lender also revealed that UK house prices edged lower in May.

This was in line with economists’ expectations, but the data also showed annual rate of growth has continued to rise.

House prices dropped by 0.1 percent in May compared with a 1.6 percent surge in April, the Halifax said.

But year-on-year rate of growth was at its highest since December. It was up 8.6 percent in the three months to May, compared with the same months last year, and up from an 8.5 percent annual increase for the three months to April.

And, as the cost of the average UK home moved up to £196,067, according to its own lending data, the Halifax said it expects the shortage of homes to push prices up yet further.

“The imbalance between supply and demand is likely to continue to push up house prices over the coming months,” said Martin Ellis, housing economist at the Halifax.

“Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”

The figures contrast with those released on Wednesday by rival mortgage lender Nationwide, which reported the lowest annual increase in house prices in nearly two years, at 4.6 percent.

House prices on both measures were growing at a double-digit rate in the middle of last year, before tighter rules on mortgage lending sapped demand.

But Britain’s housing market appears to be recovering momentum.

The Bank of England this week reported the biggest jump in the number of mortgages approved by lenders for six years, taking April’s total to the highest since early last year.

A Reuters poll this weel showed that on average, economists expect house prices to rise by 6 percent this year and 5 percent in 2016, up sharply from forecasts they made three months ago.