Alex Bannister, Nationwide's chief economist, says house prices are being driven by the unexpectedly sharp rises in London and the Southeast, which were filtering out into East Anglia and the Southwest. 'Despite the news of a global slowdown, few people believe it will affect them,' he says.

Mortgage lenders also came in for criticism by encouraging buyers to borrow more than they could afford. Traditionally, banks and building societies have advanced three times a single individual's salary, although this has started to nose upwards over the last 10 years. Now, three and a half times income is more the norm, although in certain cases anything up to nine times has been lent, particularly in the case of those working in finance and banking where huge bonuses can be earned.

Lenders in June gave the green light to 125,000 home loans, worth a total of £9.6 billion, the highest monthly figure in four years. The Bank of England's Monetary Policy Committee meets today (Aug. 1) to decide on the future path of interest rates, with any increase threatening severe hardship for buyers.