UK house prices grew by a sluggish 0.2 pct in May from the previous month, the country's largest building society revealed today. The annual rate eased to 4.7 pct in May from 4.8 pct the previous month, the Nationwide said in its monthly survey of the sector. The latest figures are worse than expected. Analysts polled by AFX News expected a monthly 0.7 pct rise for a 5.2 pct annual gain. In April house prices rose by 0.1 pct from the previous month for a 4.8 pct annual increase. The average house in the UK now costs 164,632 stg almost 7,500 stg more than at this time last year and equivalent to a price gain of just over 20 stg per day over the last twelve months. Commenting on the figures, Fionnuala Earley, Nationwide's Group Economist, said the property market remains strong despite the sluggish rate of growth for the second month in a row. However, she said there are also signs that the market is cooling. "Apart from well-known concerns about stretched affordability among first-time buyers, and the rising transactions costs that movers face, there are now further reasons to expect some cooling in the rate of house price inflation over coming months," she said. She cited comments from Bank of England governor Mervyn King saying that continued strong house price growth should not be taken for granted given the level of house prices relative to incomes. "The numbers of house purchase approvals remain well above their long term average, but they have begun to moderate since the start of the year. We expect them to cool further during the summer to around their long term trend," she added. She believes there will be some loosening in the market over the coming months as supply rises relative to demand. Additionally, rises in money market interest rate expectations may dampen house price inflation, she added. "The impact of demand will depend crucially on whether the Bank of England actually raises interest rates. In our view, the decision is still very close," she added. "For now, the effects of hawkish interest rate expectations in the financial markets on fixed mortgage interest rates and press reports pointing towards the possibility of higher rates, should contribute to a cooling of house price growth," Earley added.