Annual house price growth reached its highest level for nearly seven years in May at 10.9%, according to the latest index from Nationwide.

Average prices across the UK hit a new record of £242,832 – up £23,930 over the past twelve months.

Month-on-month prices grew by 1.8%, down slightly from 2.3% in April.

Nationwide chief economist Robert Gardener says: “The market has seen a complete turnaround over the past twelve months. 

“A year ago, activity collapsed in the wake of the first lockdown with housing transactions falling to a record low of 42,000 in April 2020. 

“But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March.

“While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained. 

“Our research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.

“Amongst homeowners surveyed at the end of April that were either moving home or considering a move, more than two thirds (68%) said this would have been the case even if the stamp duty holiday had not been extended.

“It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.”

He adds: “Of those moving or considering a move, around a third (33%) were looking to move to a different area, while nearly 30% were doing so to access a garden or outdoor space more easily.

“Consistent with this, the majority of people are looking to move to less urban areas, with this preference particularly pronounced for older age cohorts.

“Over a third (36%) of those surveyed said they were more likely to consider enhancing their home as a result of Covid-19, with nearly half (46%) of these looking to add or maximise space.”

MT Finance director Joshua Elash says: “The increase in house prices would be impressive under normal circumstances, let alone when set against the backdrop of a global pandemic. 

“With the economy set to grow faster this year than initially projected, coupled with the inflationary impact of the extraordinary level of liquidity injected into the economy since the start of the pandemic, this trend is set to continue to run for some time yet. 

“The most interesting element of this is that the driver for activity in the market appears to be lifestyle choices, with people reassessing what is really important to them. 

“With increasing numbers of people intending to work from home on an ongoing basis, the historic fixation with central London flats is being superseded by demand for more spacious houses in surrounding areas.”

Missing Element Mortgage Services broker Paul Neal says: “Not only was May one of the wettest on records, the deluge of demand for property last month was equally relentless. 

“Demand is off the scale and the inevitable upward pressure on prices is making it especially difficult for first-time buyers to get a foothold on the ladder.

“Many first-time buyers are seeing prices accelerate out of their affordability zone. 

“The stamp duty holiday and re-introduction of 95% loan-to-value mortgages have played a massive part in the surge of people buying, but repeated lockdowns have also seen many buyers looking for more space now that working from home has become the new norm.

“More needs to be done to help those first-time buyers who are unable to buy their homes because they have had hiccups with credit in the past. 

“We understand lenders need to be cautious, but the result of that caution is many people stuck paying rents that are substantially higher than mortgage payments.”