Housing market activity shows some signs of recovering and this could be the start of some unwinding of the stalemate between buyers and sellers, seeing the return of some liquidity to the market, said Nationwide today.

Their survey showed house prices increased by 0.2% in July, reversing the previous month’s fall. "However, the overall picture remains one of a gently softening market," said Fionnuala Earley, Nationwide's Group Economist.

The annual rate of house price inflation fell to 2.6% in July - its lowest rate since May 1996. This compares with a rate of 4.1% last month and more than 20% this time last year. The price of a typical house in the UK is now £158,348.

Fionnuala Earley commented: "During the month several indicators have suggested that housing market activity is improving slightly, albeit remaining at levels significantly lower than last year. The number of house purchase approvals has picked up steadily since the start of the year, reaching a seasonally adjusted 96,000 in May, up from 83,000 in January."

"Early indications suggest that there may be another small increase in official data for June, as estate agents report increased buyer activity and some softening on the part of sellers with respect to expectations on sales prices. This could be the start of some unwinding of the stalemate between buyers and sellers and see the return of some liquidity to the market."