House prices are growing at their fastest rate for more than three years, causing concern of the potential collapse of the current property bubble.

The average cost of a property in the UK rose 0.6 per cent this month and is now 6.5 per cent higher than a year ago, according to the Nationwide building society.

The national growth in prices is fuelled by double-digit growth in London, but rises are now accelerating in other areas.

Across the UK, prices are now only 6 per cent below their 2007 peak.

To calm this extreme growth in property prices the Bank of England Governor Mark Carney moved to slow the explosion in mortgage lending.

The governor announced  yesterday that the Government’s Funding for Lending scheme — a cheap source of funding allowing banks and building societies to slash their mortgage interest rates to record lows — will be ended for mortgages at the end of the year.

Jonathan Hopper, managing director of London-based Garrington Property Finders, said: “The … announcement that they’re scrapping Funding for Lending for mortgages couldn’t have been timed worse.