Despite fears of a burst in the bubble house prices continued to soar last month, new data shows.

The Nationwide building society figures revealed that house prices were up by 2.1 per cent in May.

Annual house increases are running at 17.9 per cent - the highest level since 1989.

Economists are now warning that the increases cannot be sustained.

"Although the likelihood of a collapse as happened a decade ago seems low, the longer that prices rise sharply like this, the greater the risk of a sharp correction," Philip Shaw, the chief economist at Investec Bank, told the BBC.

It has been predicted that interest rates could rise in the second half of this year - a move which would hit homebuyers who have taken on record levels of debt.

The news came as an out-going member of the monetary policy committee warned that the Bank of England could become embroiled in a political row if it continues to undershoot its target for inflation.

Sushil Wadhwani, whose term on the committee ends tomorrow, said the bank could come under political attack if it was seen to be making persistent mistakes.

"Even though the system has had a very good start, it's very important to safeguard the independence of the Bank of England," he said.

"And the best way of safeguarding it is to forestall future political criticism."