House prices saw their largest month-on-month rise in seven years in May, adding to signs that the market may be stabilising after falling almost without interruption since the end of 2007.

Prices rose by 2.6 per cent to an average of £158,565, according to the Halifax index published on Thursday. This was the biggest month-on-month gain since 2002 and the 11th biggest rise since the survey began in 1983, but followed three months of sharp price falls.