Confidence that house prices are recovering some of their lost ground grew last week when two influential reports showed prices rising strongly in July.

The Nationwide said that house prices rose by 1.6 per cent in July, leaving them just 2.7 per cent lower than the same time a year ago.  The lender said that prices have now risen for four months in a row.

And for those who thought that the Nationwide was being just too optimistic, the Land Registry issued a report which said that prices in July had risen by 1.7 per cent; the biggest monthly jump since July 2004.  The Land Registry, which records every property transaction in England and Wales, is widely regarded as being the most authoritative source of information on property prices south of the border.

Prices were still 11.7 per cent lower than a year ago, but that was better than the 13.8 per cent decline recorded in June and provides more evidence that at least some of the falls recorded last year are now being reversed.

Commenting on the recent rise in prices, Martin Gahbauer, Nationwide's Chief Economist, said: "Over the first eight months of 2009, the seasonally adjusted index of house prices has risen by 3.2 per cent, though relative to the October 2007 peak it is down by 14.4 per cent". 

He attributed the rise in prices to low interest rates and fewer homes coming on to the market.  "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008. Mortgage payments for existing homeowners - especially those with tracker or standard variable rate loans - have been reduced substantially. Before the MPC began cutting rates, the average interest and principal payment per mortgage holder represented about 38 per cent of the average post-tax labour income. Following the steep cuts in base rate, this has fallen to just 28 per cent of post-tax income. The fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell.  Partly as a result, fewer second-hand properties have come onto the market than is normally the case in recessions, which has contributed to moving the balance of supply and demand more in favour of sellers over the course of 2009".