(Updates with BoE rate decision, quotes)
By Ana Nicolaci da Costa
LONDON, April 10 (Reuters) - House prices and sales took off again in Britain last month, reflecting the economy's surprisingly fast recovery, but the Bank of England stuck to its course and left interest rates unchanged at record lows.
A closely watched survey from the Royal Institution of Chartered Surveyors showed British house prices ratcheting up in March and sales reaching a six-year high.
The group called for more houses to be built to meet over-stretched demand. Contributors to its survey nearly doubled their projection for annual house price inflation over the next five years.
The BoE has said it is "vigilant" to the risks of an over-heating property market but that it plans to deal with it, if prices threaten to get out of control, first by trying to curb mortgage lending directly rather than by raising interest rates.
The bank is concerned that raising rates too soon could unseat the recovery. It has indicated it is in no hurry to tighten monetary policy, with inflation now trending below target.
It kept rates at 0.5 percent on Thursday, where they have been since 2009, and said it would maintain the stock of asset purchases from its quantitative easing programme at 375 billion pounds ($628.07 billion).
Analysts say the decisive factor for the BoE is likely to be wages, which are only slowly showing signs of rising.
"Wages are the thing that will trigger a rate move. I think they have different tools they may well deploy to address house price inflation," said Alan Clarke, economist at Scotiabank.
Record low interest rates, low unemployment and government-sponsored schemes have all buoyed Britain's housing market.
House prices have also risen due to a shortage of supply and because of foreign interest in London properties, pricing some people off the housing ladder despite government efforts to the contrary ahead of elections next year.
The surveyors' group said its seasonally adjusted house price balance rose last month to +57 from an upwardly revised +47 in February, beating all forecasts in a Reuters poll. The rise took the balance near to November's +58, which was the highest since June 2002.
House prices rose in every area of Britain in March, and by the most in London and the South East.
As demand outstrips supply, contributors to the survey expected prices nationally to rise by 5.9 percent a year over the next five years, nearly double the 3.1 percent forecast this time last year.
"For the market to operate effectively, we desperately need more homes in areas where people want to buy and want to live," Simon Rubinsohn, the surveyors' chief economist said.
"Until this happens, we're likely to see prices continue to increase and it is going to be ever harder for many first time buyers to conceive of ever owning their own home."
HELP TO BUY
The government has sought to tackle the supply problem by providing equity loans to buyers of newly built homes through its Help to Buy scheme and last month announced it would extend this part of the scheme to the end of the decade.
But some fear other government-supported programmes, such as its guarantees for risky mortgages, could inflate prices further.
Indeed, concerns about the housing market prompted the BoE at the start of the year to refocus its Funding for Lending Scheme away from mortgage lending and dedicate it exclusively to business lending.
Finance minister George Osborne has played down the immediate impact of rising house prices, but he too has said vigilance is needed.
($1 = 0.5971 British Pounds) (Reporting by Ana Nicolaci da Costa)