UK house prices
House prices have risen in the UK for sixteen consecutive months, according to NationwideReuters

The outlook for the UK housing market is "highly uncertain" amid mixed messages from the data.

That is according to Nationwide Building Society, one of the UK's largest mortgage lenders.

In its monthly house price index for August, Nationwide said the average price of a UK home lifted by 0.8% on the previous month in the sixteenth consecutive increase. It hit £189,306.

But the number of mortgage approvals had dropped by a fifth between January and May.

At the end of April and following its Mortgage Market Review, the Financial Conduct Authority (FCA) imposed a tougher set of affordability tests on lenders, making them more stringent in their assessments of the ability of borrowers to make repayments.

Robert Gardner, chief economist at Nationwide, said the cause of the recent slowdown was unclear.

"There was a modest [mortgage approvals] rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage Market Review rather than an underlying loss of momentum," Gardner said.

"Surveyors report that new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the quarters ahead.

"However, the brightening economic outlook is likely to provide on-going support for housing demand. Consumer sentiment remains buoyant thanks to declining inflation and sustained increases in employment."

Gardner added that the Bank of England is not expected to hike interest rates until the first quarter of 2015, and even then it will only be a modest rise. This should support demand by keeping mortgages cheap.

And the supply of housing will remain constrained, he said, keeping an upward pressure on house prices.