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U.K. Home Prices Rise for Second Month as FLS Cuts Lending Costs

U.K. house prices rose for a second month in February as the Bank of England’s credit-easing program helped lower mortgage rates, Nationwide Building Society said.

The average cost of a home increased 0.2 percent from January to 162,638 pounds ($247,000), the Swindon, England-based customer-owned lender said today. Prices were unchanged from a year earlier.

Data today may show mortgage approvals rose to a one-year high in January after the central bank’s Funding for Lending Scheme eased conditions in the home-loan market. While mortgage approvals are rising, they are still less than half the level in the decade through 2007. The BOE is counting on the FLS to boost lending and bolster an economy that’s close to slipping back into a recession.

“The FLS has achieved some success in bringing down mortgage rates, with encouraging signs of an improvement in credit availability,” said Robert Gardner, chief economist at Nationwide. “While the economic backdrop remains challenging, there are reasons for cautious optimism that activity will gather momentum in the months ahead.”

Approvals for home loans probably increased for a sixth month in January, to 56,500 from 55,785, according to the median of 19 estimates in a Bloomberg News survey. The BOE will publish the figures, along with data on consumer lending, at 9:30 a.m. in London.

The Nationwide report also showed that U.K. house-price growth accelerated to 0.6 percent in the three months through February from 0.4 percent in the previous three months. Gardner said progress in the housing recovery is “likely to be gradual, as stubbornly high inflation will continue to exert pressure on household budgets.”

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