UK house prices rose by 11.1% in the past 12 months, the fastest increase in seven years, new figures from Nationwide have revealed.
The average UK property price now stands at £186,512, higher than the previous peak of October 2007, and will renew fears that the UK market is in the midst of a housing bubble. May was the 13th successive month that prices rose.
However, prices only rose by 0.2% in May compared to 1.2% in April, with the building society citing new, tougher mortgage rules as a possible reason for the slight slowdown.
Lenders are now required to thoroughly assess a potential borrower's outgoings before they are approved for a mortgage thanks to rules introduced by the Mortgage Market Review (MMR) in late April.
Robert Gardner, chief economist with Nationwide, said: "There have been tentative signs that activity in the housing market may be starting to moderate, with mortgage approvals in April around 17% below January's high.
"It is too early to say whether nationally this is indicative of a cooling trend in the wider market. The slowdown may partly be the result of the introduction of MMR measures, which may take a few months to bed down."
He added: "The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer."
Meanwhile, the Bank of England has revealed the number of mortgage applications fell for the third month running in April. Some 62,918 were approved in during the month, down from 75,838 in January and the lowest number since June 2013.
Signs of a slowdown?
Mortgage expert with London and Country Mortgages, David Hollingworth, said the decline in approvals could well be a sign that the market is beginning to slow but more needs to be done to ensure it doesn't continue to accelerate.
"The figures will do little to calm the debate about what needs to be done about house prices, supply needs to be expanded in order to meet the levels of demand," he said.
"To counter this, the approval figures seem to suggest that they are dropping a little bit, so there are mixed messages."
He added: "Prices are only going one way, and this is what we saw before when first-time buyers felt rushed to buy for fear of prices getting away from them. When we reached the peak back in in 2006 and 2007 buyers felt they had to take action or otherwise property would have been out of their grasp.
"People need to purchase for the right reasons, rather than being pushed into buying."
The European Commission has called on the UK to revalue council tax bands - and thus raise taxes on higher value properties - build more homes, and adjust the Help to Buy scheme, in order to help the market.