According to Hometrack, house prices increased 0.5% in May – 0.1% lower than the rise seen in the previous two months and 0.2% lower than February 2014.

The coverage of postcode districts with price increases over the month slipped from 50% in March and April to 42% in May. The coverage of price increases fell back both in London and the rest of the country.

Hometrack said a lack of supply continues to support pricing levels but the growth in demand is also starting to moderate.

While house prices continue to rise in London, there has been a continued slowdown in the rate of growth with prices up 0.6% in May, versus an average increase of 0.8% per month over the last 6 months.

In London the impetus for growth is emanating out of the lower value markets which offer better value for money. In central London prices were up just 0.2% in May.

The time on the market averages 6.5 weeks, up slightly on April 2014 (6.3 weeks).

The proportion of the asking price achieved is starting to plateau as the market starts to resist higher prices and currently averages 96.8% – the highest level since September 2002.

Richard Donnell, director of research at Hometrack, said: “House price inflation is starting to moderate both in London and nationally. The proportion of postcode districts with price increases slipped from 50% to 42% of market in May. This led to a slowdown in overall house price growth, with prices increasing by 0.5% in May, compared to 0.6% growth in both April and March. Signs of this slowdown in momentum were present in Hometrack’s monthly national housing survey in April, where we identified early signs of growing price resistance on the part of buyers in London.

“Strong price increases, widespread talk of a possible housing bubble and recent warnings from the Bank of England on house price inflation are starting to test the resolve of buyers. London has led the recovery but the impetus for growth is emanating out of the lower value parts of the London market. In Central London house price growth has slowed significantly in the last year and was just 0.2% in May.

“As the recovery spreads from London across the country house price inflation will be driven by mortgage reliant demand which is a key area of concern for the Bank of England. The implementation of the Mortgage Market Review (MMR) looks to be perfectly timed as stronger affordability checks will limit the ability of households to get ‘carried away’ by talk of housing recovery. There are already signs of slower activity in the mortgage market and we expect to see further signs of slowing house price momentum in the months ahead.”