LONDON Feb 28 (Reuters) - Britain's housing market perked up at the start of 2018 with the sharpest increase in the number of mortgages approved for house purchase in nearly three years, Bank of England figures showed on Thursday.

Britain's economy grew more slowly on an annual basis than all other Group of Seven countries in the final three months of last year, after consumers were hurt by higher inflation caused by the pound's fall after the Brexit vote in June 2016.

The housing market has also been sluggish - especially in London and surrounding areas - and major mortgage lender Nationwide said earlier on Thursday that prices in January rose at their weakest annual rate since August, up 2.2 percent on a year earlier.


But the BoE said the number of mortgages approved for house purchase rose to 67,478 in January from a one-year low of 61,692 in December. This was the sharpest monthly rise since April 2015 and took the outright number of approvals to its highest since July 2017, far outstripping economists' forecasts of 62,000 in a Reuters poll.

The central bank raised rates for the first time since 2007 in November, reversing a cut made in August 2016, and last month it said rates would probably need to rise sooner and by slightly more than it had thought before.

Economists polled by Reuters expect the BoE to raise rates to 0.75 percent from 0.5 percent by May, and financial markets price in a high chance of a further rise to 1 percent before the end of this year.

Governor Mark Carney last week said rate decisions would depend heavily on how businesses and households reacted to ongoing talks between London and Brussels on Britain's planned exit from the European Union in March 2019.

Figures last week from industry group UK Finance showed British banks in January increased the number of mortgages they approved for the first time in four months.

In November British finance minister Philip Hammond cut a tax on property purchases for first-time buyers in an attempt to help younger people get into the property market.


(Reporting by David Milliken and William Schomberg)