There are now 20,000 first time buyers a month, compared to 32,000 a month before the financial crisis.
Robert Gardner, Nationwide's chief economist, said: “While activity in the housing market remains muted by historic standards, there have been tentative signs of a pickup in activity in recent months.”
This has been reflected in the index which shows an improvement in affordability for first time buyers, who currently account for 40% of housing transactions.
Typical first time buyers homes now cost 4.4 times average earnings, well below the 5.4 times average recorded in 2007.
The decline in interest rates and a small increase in nominal earnings have also helped to improve affordability.
Nationwide said: “The most decisive factor in achieving a sustained increase in first time buyer numbers is likely to be the performance of the wider economy - especially the labour market.”
Figures released today by the Office for National Statistics (ONS) have shown that total employment in the three months to November grew by 1.9% compared with a year earlier and unemployment currently stands at 7.7%.
Annual consumer price inflation (CPI) held at 2.7% in December for the third month in a row, and has remained within the Bank of England’s inflation boundary for the past nine months, following two periods during and after the recession when it briefly touched 5%.
Between September to November 2011 and September to November 2012, total pay (including bonuses) rose by 1.5% and regular pay (excluding bonuses) rose by 1.4%.
Jonathan Samuels, CEO of Dragonfly Property Finance, said: "The Nationwide appears more confident than many in expecting the economy to pick up pace during the course of 2013.
“What's certain is that the property market will remain acutely sensitive to the economic environment during 2013.”
