House prices increase 3.9%
The 3.9% year-on-year rise is the strongest annual upswing recorded since August 2010 and takes average prices to £170,825, according to the building society's figures.
On a month-on-month basis, prices recorded a "robust" 0.8% increase in July, which was the biggest uplift since August last year, the report said.
Lenders, estate agents and property websites have all been reporting surges in activity and rising confidence following the launch of Government schemes to give the housing market a shot in the arm.
Mortgage rates across the market have plummeted since the Government launched a scheme called Funding for Lending a year ago, which gives lenders access to cheap finance.
Initiatives called NewBuy and Help to Buy have also been introduced to give people with smaller deposits a helping hand, and lenders have been reporting more first-time buyers entering the market, which should help free up some stuck chains.
The boost has led to some stronger-than-expected house price increases this year so far, leading some experts to revise their predictions upwards for 2013.
Concerns have been raised that Help to Buy, which will be fully fired into action next year and underwrite £130 billion of low-deposit mortgage lending with state guarantees, must not lead to a property "bubble", with borrowers overstretching themselves.
Robert Gardner, Nationwide's chief economist, pointed out that the year-on-year growth was boosted by a low base to start from. House prices fell by 2.6% annually in July last year.
He said house prices are around 12% higher than the lows seen in the grip of the financial crisis, although they remain about 10% below the all-time highs recorded in 2007.
Mr Gardner said the latest figures provide "further evidence of an upturn in the housing market".
He said: "Signs of a modest improvement in wider economic conditions and further modest gains in employment are likely to be lifting buyer sentiment.
"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."
Mr Gardner said a lack of homes for sale and "subdued" building activity are keeping the supply of homes constrained, which is helping to keep prices up at a time when buyer demand has strengthened.