UK House Price Inflation at 5-mth High in May

British house prices rose 0.5 percent in May, taking the annual growth rate to 10.3 percent.

British house prices rose 0.5 percent in May, taking the annual growth rate to 10.3 percent,
its highest level in five months, the Nationwide building society said on Thursday.

 While the monthly rate was slower than April's 0.9 percent
gain seen, the firming in the annual rate from 10.2 percent
suggests four interest rate rises since August have so far
failed to have any significant impact on house price inflation.

 The latest increase took the price of an average house to
181,584 pounds ($358,300) in May, some 17,000 pounds higher than
at the same time last year, and follows the Bank of England
raising interest rates to 5.5 percent at the start of the month.

 The data had little impact on financial markets, which are
pricing in a strong chance that interest rates will rise to 6
percent by the end of this year.

 "Today's report gives no indication the BoE's recent
tightening campaign is beginning to weigh on the market," said
Richard McGuire, strategist at RBC. "We suspect the Bank will
continue to raise rates until it sees some form of discernible
weakness in the housing sector."

 But Nationwide said there were now signs the market was
slowing.

 "The last rise in rates and the financial market expectation
of at least one more will dampen demand and buyers' expectations
of further house price growth during the rest of 2007 and
contribute to the slowing of house price growth," said Fionnuala
Earley, Nationwide's chief economist.

 "Higher interest rates clearly present risks to the housing
market, but providing the economy, and particularly the labour
market, remain in good shape, we should still expect to see a
measured cooling."

 Nevertheless, she warned that buyers should be wary of
stretching themselves to get on the housing ladder.