The building society’s house price index showed property values are up 3.9 per cent compared to July 2012, resulting in the strongest rate of yearly price growth since August 2010.
The index also showed that the average UK house price rose from £168,941 in June to £170,825 in July.
Robert Gardner, chief economist at Nationwide, said “modest” improvements in the labour market, as well as the wider economy, could be lifting buyer sentiment.
He added: “An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, are also boosting the demand for homes.”
Colin Parkin, director of Lincolnshire-based Ample Financial Services, said: “Property has been selling well here, especially during the past couple of months. But prices are still fairly low and they’re only just getting back to pre-housing crash levels.”