UK house prices continued to rise in August, increasing by 0.6% compared with July, the Nationwide said.
The building society said that property prices were up by 3.5% compared with a year earlier, although August 2012 was a slow month.
The average home was valued at £170,514, it said.
Greater consumer confidence, owing to more employment and signs of economic recovery, helped push up prices.
The building society's chief economist, Robert Gardner, added that greater availability of cheaper mortgages had also increased activity in the market.
The three-month on three-month comparison in prices, regarded as a less volatile measure of property prices, recorded a 1.4% rise.
This was the biggest increase since mid-2010, the Nationwide said.
Robert Gardner, Nationwide's chief economist, said: "A number of factors appear to be contributing to the recent upturn in house price growth. Consumer confidence has increased significantly in recent months, thanks to further modest gains in employment and signs that the UK economy is finally gathering momentum.
"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, is also enabling more people to take their first steps into the property market."