House prices edge up

House prices rose slightly faster than expected in May but remained 1.2 per cent below their level a year ago, mortgage lender Nationwide said on Friday.

House prices rose 0.3 per cent this month, offsetting the 0.2 per cent fall recorded the previous month, but doing little to alter the picture of a stagnating market.

"Overall, the modest pace of house price growth in May suggests that the property market is continuing to mirror the lacklustre trends evidence in the wider economy," said Robert Gardner, Nationwide chief economist.

The three month on three month measure of house price increases - a good indicator of the underlying trend - was little changed at 0.6 per cent.

Nationwide said that squeezed household budgets and weak wage growth continued to weigh on the market and sideways price action was the most likely trajectory for the remainder of the year.

Data earlier this week showed household spending fell in the first quarter at its sharpest pace since the recession, more than offsetting a boost from Britain's improved trade performance.

"The pattern of the recovery argues against a strong bounce in property prices," Gardner added. "Business investment and net trade are expected to drive the economy in the quarters ahead, rather than consumer spending."