House prices rebounded in May with a larger than expected 0.4 percent monthly increase that reversed April's unrevised decline. This was the first increase in the Nationwide's index since February and steep enough to lift the annual inflation rate from 0.6 percent to 1.3 percent.

However, the 3-monthly change eased from 0.8 percent to 0.3 percent, its weakest reading since the three months to November last year suggesting that the underlying trend in prices has cooled further. That said, the market remains resilient in the face of still high mortgage rates and ongoing affordability pressures. If sustained, rising consumer confidence (currently at a two-and-a-half year high) should provide some support over coming months despite the looming general election.

More generally, today's update puts the UK RPI at minus 9 and the RPI-P at minus 31. Apart from inflation, overall economic activity is falling short of market forecasts but it is the unexpected strength of the former that should prevent the BoE MPC cutting Bank Rate in June.

Prices are expected to rise 0.1 percent on the month after a 0.4 percent drop in April.

The Nationwide House Price Index (HPI) provides house price information derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted; that is, they track a representative house price over time rather than the simple average price.

Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.

Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.