House prices are racing ahead as stimulus for the market kicks in

House prices are rising at the fastest annual pace for 18 months as the Government's steroid boost for the property market kicks in, Nationwide said yesterday.

Average property prices rose 0.4 per cent in May and are 1.1 per cent higher than a year ago, the biggest annual rise since November 2011, the lender's latest index shows.

Nationwide's chief economist Robert Gardner said the number of property transactions was running at about 5 per cent above the 2012 average in the opening months of this year, as an improving economy and support schemes such as Help to Buy kicked in.

He said activity would "continue to gain momentum", albeit tempered by a sluggish jobs market and falling real-terms wages.

The latest signs of life come amid worries over a house prices boom as the supply of new homes fails to keep up with the increased demand.

The IMF and the OECD think-tanks are worried about the Chancellor's Budget initiative. The Bank of England's Governor, Sir Mervyn King, has also expressed concern it could help create a new housing bubble.