The Halifax price index jumped by a record 4.2 percent in May, taking the annual rate of inflation to 18.5 percent and -average price of UK property to £107,152.

Commenting on the figures Martin Ellis, Group Economist, said: "House prices rose at their fastest ever monthly rate in May. A combination of very low interest rates and unemployment have boosted housing demand which, together with a shortage of suitable properties for sale, has driven prices up sharply.

Indicators of housing market activity confirm the buoyant state of the market. The latest figures from the Bank of England show that the number of mortgage approvals for house purchase also rose to a record level in April, whilst Inland Revenue statistics show that property transactions in England and Wales in April were 17% higher than a year ago.

At 3.7, however, the ratio of house prices in relation to average earnings is well below the peak of 5.0 and only a little above its long-term historical average. This, combined with the low level of mortgage payments as a proportion of income for a typical buyer, demonstrates that owning a home remains an affordable proposition for most people in most parts of the country.

It is clear that house prices will not slow as quickly as we predicted earlier in the year. Probable interest rate increases in the next few months should ease the pace of future house price growth, however."