UK house prices increased for the first time in more than a year in February as the decline in borrowing costs helped to bring an upturn in the housing market, the Nationwide Building Society said on Friday.

House prices posted an annual increase of 1.2 percent, in contrast to the 0.2 percent decrease in January.

Prices were forecast to climb only by 0.3 percent. The increase marked the first time upturn since January 2023.

Month-on-month, house prices rose 0.7 percent, the same rate as seen in January.

"House prices are now around 3% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects," Nationwide's Chief Economist Robert Gardner said.

Gardner said industry data sources suggested a noticeable increase in mortgage applications, while surveyors reported a rise in new buyer enquiries.

Nonetheless, the economist said the near-term prospects remain highly uncertain partly due to ongoing uncertainty about the future path of interest rates. "Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery," said Gardner.

Further, the economist observed that the squeeze on household budgets is easing with wage growth outstripping inflation by a healthy margin.

However, it will take time to make up for the ground lost over the past few years as consumer confidence remains fragile.

Data released on the Thursday also signaled an improvement in the property market. Mortgage approvals for house purchases rose to 55,200 in January from 51,500 in December.

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