London House Prices Spiral to Fresh Highs Amid UK Recovery

The gap between London's house prices and those in the rest of the UK is the widest it has ever been, according to the building society Nationwide.

London's house prices were 18.2% higher than a year before in the first quarter of 2014 said Nationwide, the fastest growth rate in 11 years. In cash terms the average London price was £362,699. This compares with 9.2% growth for the UK as a whole and an average price of £178,124.

Britain's housing market is recovering thanks to a mix of a healing domestic economy and government schemes which have made mortgages cheaper and easier to access, such as Help to Buy.

House prices have also been driven up by a severe imbalance between higher demand and limited supply, a situation that is particularly intense in London.

"There is further evidence that the upturn in the housing market is gaining momentum across the UK," said Robert Gardner, Nationwide's chief economist.

"For the third quarter in a row all thirteen regions saw annual house price growth in Q1 2014.

"However, the pattern of the southern regions recording the most rapid price gains, especially London, remained very much in evidence."

Critics of government efforts to help people get mortgages say they risk inflating a bubble in the housing market, but Nationwide said most UK regions have house prices that are still below their 2007 peaks.

Moreover, the Bank of England said the level of mortgage approvals slowed in March to 70,309, a fall of more than 6,000 on the previous month.

Mortgage approvals are well below pre-financial crisis norms of 90,000 a month.