By Andy Bruce
LONDON (Reuters) - Britain's house price surge slowed in January after the biggest monthly jump in more than four years in December, mortgage lender Nationwide said on Wednesday, although on an annual basis prices continue to rocket higher.
British house prices rose roughly in line with expectations, up 0.7 percent this month compared with a 1.4 percent increase in December, which was the biggest single-month increase since August 2009.
The increase this month pushed the average price of a British house to 176,491 pounds ($292,700), or 8.8 percent higher on the year in the biggest annual rise since May 2010, when Britain's coalition government first came to power.
Many economists are concerned that a government scheme launched in October which makes it easier for home buyers to get a mortgage with only a 5 percent deposit is likely to raise prices, rather than boost construction as the government hopes.
"The housing market is continuing to gather momentum on the back of further solid gains in employment, record low mortgage rates and rising confidence," said Robert Gardner, Nationwide's chief economist.
Nationwide pointed to a hearty rise in the number of first-time buyers, up 32 percent in the third quarter of 2013 compared with the year earlier.
"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 with 280,000 new jobs created in the three months to November - the largest increase on record," said Gardner.
Economic growth data for the fourth quarter of last year, released on Tuesday, boded well.
The UK economy grew 0.7 percent quarter-on-quarter in the three months through December, while data last week showed a steep drop in the unemployment rate towards the 7 percent threshold at which the Bank of England has said it will consider the future direction for monetary policy.
BoE Governor Mark Carney said earlier this month that British house prices are likely to keep rising robustly until the middle of next year as part of a broader upturn in housing market activity.
In a question-and-answer session with lawmakers, Carney said that for now the rise mainly showed that housing market activity was catching up after it had been depressed by the financial crisis.
Nationwide said house prices are now around 4 percent below their 2007 peak.
(Editing by Susan Fenton)