House prices in the UK have experienced a surprise bounce.

According to the latest House Price Index by Nationwide, March house prices experienced a “surprise bounce”, rising for the first time in 16 months.

Compared to February, property prices in the UK rose by 0.9%. House purchase activity has also reached its highest level since May 2008.

The March increase reduced the annual rate of house price falls from 17.6% in February to 15.7%. The average price of a UK house is now £150,946.

The building society described the increase as a “surprise bounce” and welcomed the signals of market improvement but warned of undue optimism. Despite the rise in house prices, the improvement does not signify house price recovery. Prices are still significantly lower than this time last year.

Mortgage approvals have also increased in the month of March, rising for the first time since May 2008.

Nationwide stated that the current movement in the housing market is likely to reflect potential buyers returning to the market after the turbulent financial period at the end of 2008. The willingness of potential house buyers is an encouraging sign and is probably due to the falling cost of borrowing.

The report also highlights flat prices as being the most volatile out of all residential property types.

Fionnuala Earley, Nationwide’s Chief Executive, said: “While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached. The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing.

“However it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices.”