House prices have risen 1.3% this month in their biggest monthly rebound in more than two-and-a-half years, according to Nationwide.
Prices rose by a "surprising" 1.3% month-on-month in August to climb to an average of£164,729, putting an end to two consecutive months of declines and marking the biggest monthly increase since January 2010, the building society said on Friday.
Despite the promising news, prices are still 0.7% lower than August last year and the market remains volatile against backdrop of a tough economic climate.
Robert Gardner, Nationwide's chief economist, said: "Given the difficult economic backdrop, the extent of the rebound in August is a little surprising.
House prices saw a 'surprising' 1.3% rise after two months of decline, Nationwide said
"However, we should never read too much into one month's data, especially since monthly price changes have been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday for first time buyers."
He said the fact that the annual decline has slowed down from a 2.6% drop recorded in July provides some evidence that the market is "fairly stable".
However, property analyst Hometrack predicted earlier this week that prices will come under downward pressure for the rest of the year due to relatively weak buyer demand compared with the number of homes on the market.
Analysts claimed there is little reason for optimism over a recently-launched funding for lending scheme by the Bank of England and the Treasury has done much to increase the availability of mortgages for people with lower deposits and first-time buyers, with the choice available shrinking back over the last six months.
On Thursday, the Bank of England published statistics which showed that mortgage approvals increased slightly in July compared with an 18-month low recorded in June.