LONDON, Jan 31 (Reuters)- British house prices rose more than expected this month compared with December and stopped their annual decline, helped by the central bank's scheme to boost lending, mortgage lender Nationwide said on Thursday.
Nationwide data showed that house prices ticked up 0.5 percent on the month after a slightly upwardly revised flat reading in December.
Compared with January 2012, prices were unchanged, avoiding a decline for the first time since last February.
Both the monthly and the annual figures were better than forecast by analysts.
"While activity in the housing market remains muted by historic standards, there have been tentative signs of a pick-up in activity in recent months," said Nationwide's chief economist Robert Gardner.
"The Funding for Lending Scheme has achieved some success in bringing down mortgage rates, with some signs of a pick-up in lending activity," he added.
The scheme, which came into effect in August, allows banks and building societies to access more than 80 billion pounds ($126 billion) in cheap finance if they maintain or increase net lending to households and businesses.
"Hopefully, the momentum will continue to build in the months ahead, though much will depend on whether the wider economic environment improves," Gardner said.
Bank of England data for last month showed the highest number of mortgages approved since January 2012, and the biggest increase in net mortgage lending since April - a rare sign of confidence in an otherwise flagging economy.
Britain's economy shrank more than expected at the end of 2012, with a slump in oil production, lower factory output and a hangover from the London Olympics pushing it to the brink of its third recession since 2008. ($1 = 0.6332 British pounds) (Reporting by Olesya Dmitracova; Editing by Ruth Pitchford)