THE housing market is still sluggish, according to Swindon's Nationwide Building Society.

Its report for May has found that prices rose on average 0.2 per cent in the month more than the 0.1 per cent increase in April but still not a strong rise.

The price of an average house in Britain is now £164,632 about £7,500 more than this time last year.

Nationwide's group economist Fionnuala Earley said: "Housing market data since the start of the year has largely pointed to an acceleration in house price inflation.

"Trends in most house price measures have risen and the level of house purchase activity has been remarkably strong.

"The number of mortgages approved for house purchase has been well above trend for the last eight months and has only recently fallen back from a high of 120,000 in December and January.

"Activity this strong was last seen when house price inflation was in double digits two years ago. In addition estate agents' sales to stock ratios are high suggesting the potential for further house price growth.

"Apart from well-known concerns about stretched affordability among first-time buyers, and the rising transactions costs that movers face, there are now further reasons to expect some cooling in the rate of house price inflation over coming months."