UK house prices rose by 1.3% in August, the largest monthly increase since January 2010, reversing the declines recorded in the previous two months, according to the latest Nationwide House Price Index.

However, prices are 0.7% lower than one year ago.

The price of a typical home is now £164,729.

“Given the difficult economic backdrop, the extent of the rebound in August is a little surprising,” said Robert Gardner, Nationwide’s chief economist. “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. These are factors that cannot be controlled by the usual process of seasonal adjustment.

Gardner added: “Nevertheless, the fact that the annual pace of house price decline moderated to -0.7% in August from -2.6% the previous month provides evidence that conditions remain fairly stable. This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession.”