The Bank of England has taken the first step in putting the brakes on the surging property market as it scrapped a flagship initiative that encourages mortgage lending.

Governor Mark Carney said the Funding for Lending scheme (FLS) stimulus was no longer needed amid rising house prices, and it would instead be further focused on helping small business borrowing, which remains muted.

Mr Carney raised the spectre of a future property bubble where households over-stretch themselves to be able to buy homes, and said the Bank was taking measured steps now to try to avoid more drastic action in the future.

He said: "The changes announced today refocus the FLS where it is most needed - to underpin the supply of credit to small businesses over the next year - without providing further broad support to household lending that is no longer needed."

While areas like Scotland continue to fall overall, London has seen prices soar by nearly 10% when compared to last year, according to figures from the Office for National Statistics earlier this month.

David Hollingworth, of London and Country Mortgages, described it as a "significant" development for borrowers who have become used to ultra-cheap deals.

Before FLS, two and five-year fixed-rate deals had been about 1% higher than they are now.

But the Council of Mortgage Lenders said the announcement would not be a shock to the system as funding available on wholesale markets has improved.