The Nationwide Building Society has warned that house prices are now rising at an "unsustainable rate".

House prices rose by 1.1 per cent during July - taking the rise over the last 12 months to 10.9 per cent.

With the average house price now nearly £90,000 the Nationwide is warning that the market will have to cool at some stage.

"House prices are rising at an unsustainable rate and the market must slow at some stage, although there are no visible signs of this happening yet. If homebuyers remain confident about the housing market and their ability to finance their mortgages, an upward revision to our forecast will become almost certain," the Nationwide says.

The building society had predicted that house prices would rise by seven per cent in 2001 - although many predict that the increase will now be in double figures.

Despite the recent increases, high street lenders believe that the current economic slowdown will impact upon the housing market at some stage later this year.