LONDON (Reuters) - British house prices rose at their fastest annual pace in nearly three years this month, data from mortgage lender Nationwide showed on Friday, adding to signs that Britain's economy is starting to pick up.
Nationwide said that house prices rose by 0.3 percent on the month in June to give a 1.9 percent annual rise - broadly in line with expectations and the biggest yearly increase since September 2010.
House prices had risen 0.4 percent on the month in May, and the data follows a GfK consumer confidence released earlier on Friday which showed the highest morale in more than two years.
"Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme," said Nationwide's chief economist Robert Gardner.
The FLS - which was set up by the Bank of England and Britain's finance ministry a year ago - offers banks and building societies cheap finance if they increase lending.
To date, its main impact has been in lowering banks' borrowing costs and reducing the cost of mortgages.
Chancellor George Osborne also announced measures in his March budget aimed at boosting house-building, but there has been little impact so far.
"There are few signs that the supply of housing is improving significantly. Indeed, construction data point to a further decline in building activity in recent quarters from already depressed levels," Gardner said.
(Reporting by David Milliken; editing by Ron Askew)