The average house price is set grow by a further 40 per cent and break the £300,000 mark within the next five years, the National Housing Federation (NHF) has claimed.

Despite Gordon Brown having recently pledged to build an additional three million new homes across the country in the next few years, the NHF has concluded that a shortage of properties for sale will be one of the principal factors behind the market growth continuing.

According to the organisation, by 2012, the average cost of a home in London is likely to be as much as £500,000, with even property in the cheaper regions of the country, such as the north-west and Yorkshire and Humberside, will cost on average at least £200,000, thereby adding to the problems of affordability currently facing first-time buyers.

David Orr, NHF chief executive, said: "More and more people are going to find themselves priced out of the property market and struggling to find a decent home."

The comments come as the majority of market observers expect that the Bank of England will put interest rates up to six per cent over the coming weeks, thereby adding to the financial problems facing house buyers.