The UK's housing boom is showing few signs of ending according to the Nationwide building society.

Its latest snapshot of the market found that prices rose 2.5% between July and August, giving an annual increase of 22.7% - the strongest rate since 1989.

A sharp slowdown looks unlikely

Alex Bannister Nationwide

"The market slowed recently because of the usual seasonal pattern but there is no sign of an underlying weakening," said Nationwide's group economist Alex Bannister.

But he added that the current rate of price growth was unsustainable, and would ease eventually.

"However, unless economic conditions deteriorate significantly, with unemployment and interest rates increasing, a sharp slowdown looks unlikely," Mr Bannister said.

"With interest rates set to rise modestly, affordability will deteriorate slowly and above earnings house price inflation is likely to continue for some time to come."

Rate dilemma

The Bank of England has kept interest rates at 4% since last November in an attempt to boost growth in the economy.

But it has also been concerned that the surging housing market could fuel a rise in inflation.

With interest rates at their lowest level for 40 years, home buyers have been able to afford bigger mortgages and that has helped to drive prices higher.

But surveys by other organisations in the housing market found that price rises were beginning to ease, suggesting that the housing boom could be coming to an end.

Unusually strong

According to Nationwide's figures, the jump in prices between July and August means that house prices have risen 8.4% over the last three months. That is an unusually large increase.

"There have been just seven other occasions in the past 50 years when prices have risen this strongly in a three-month period," Mr Bannister said.

He added that while growth had slowed from a peak of 3.3% in June, this was due to the usual summer slowdown.