LONDON (Reuters) - Britain's housing market cooled further in the three months December as house prices rose by 7.8 percent compared with the same period last year, the smallest increase since last January, mortgage lender Halifax said on Thursday.
In December alone, prices rose by a stronger-than-expected 0.9 percent after a 0.5 percent increase in November, marking the biggest monthly increase since July.
Economists had expected prices to rise by 8.0 percent on the year and 0.3 percent on the month, according to a Reuters poll.
Halifax reiterated that it expects house price growth to moderate this year to between 3 and 5 percent.
"The deterioration in housing affordability as a result of rising house prices, earnings growth that has been consistently below ... inflation until very recently and speculation of an interest rate rise, have combined to temper housing demand since the summer," said Martin Ellis, Halifax's housing economist.
The Bank of England has welcomed signs that Britain's housing market is cooling off after double-digit price gains in the middle of last year, restrained at least in part by new controls on mortgage lending.
Halifax's quarterly rate of house price growth slowed to 0.3 percent, the lowest reading since November 2012.
Last week Nationwide, another mortgage lender, said house prices rose at the slowest annual rate in more than a year, but it expected the market to recover in 2015 if the economy improves as expected.