Housing market could be hit by higher interest rates, Nationwide warns

More rises in mortgage interest rates could hit the UK's property market, Nationwide has warned.

The building society said that house prices in the year to May fell by 3.4%, a bigger decline than a drop of 2.7% the month before.

The Bank of England is forecast to raise interest rates even further because of stubbornly high inflation.

As a result, Nationwide said "headwinds to the housing market look set to strengthen in the near term".

Official figures last week showed the UK inflation rate - which charts rising prices - slowed in April by less than expected to 8.7%.

That led analysts to predict that the Bank of England will have to raise interest rates above their current level of 4.5% to as high as 5.5% to try to slow price rises.

Nationwide also noted that rates are also projected to remain higher for longer.

"If maintained, this is likely to exert renewed upward pressure on mortgage rates," said Robert Gardner, Nationwide's chief economist.

However, he added that the building society was not expecting a housing market slump, given that "labour market conditions remain solid and household balance sheets appear in relatively good shape".