British house prices rose and mortgage lending surged more than forecast as the property market's momentum continued to build at the end of last year. Nationwide Building Society said home values increased 1.4 per cent last month, taking their gain last year to 8.4 per cent, the biggest annual rise since 2006. Separate reports in London showed mortgage approvals are now at the highest in almost six years and growth in construction is being led by homebuilding. The housing revival, fuelled by an improving economy and government measures, has prompted a response from the Bank of England (BoE). It ended incentives on mortgage lending in a credit-boosting programme and will focus on corporate credit. The need for such a move was highlighted by data showing business lending fell the most in at least 18 months in November. "Surveys consistently show markedly rising buyer interest and strengthening activity so house prices look set to see further strong increases," said Howard Archer, chief UK economist at IHS Global Insight in London. "The decision to end Funding for Lending support for lending to households looks a highly sensible decision, although in itself it is unlikely to act as a major brake on housing market activity." In contrast to the increase in home loans, the BoE data showed business lending fell £4.7 billion (HK$60 billion) in November, the biggest drop since the data series began in May 2011. Lending to manufacturers fell 3.1 per cent in the past year. Home-loan approvals rose to 70,758 in November, the most since January 2008, compared with 68,029 in October, the BoE said. Mortgage lending increased by £910 million. "A large part of the pickup in the housing market can be attributed to further improvements in the labour market and the brighter economic outlook," said Robert Gardner, chief economist at Nationwide. "Policy measures played an important supporting role." Gardner also said "ultra-low" borrowing costs were fuelling demand for property. The BoE's Monetary Policy Committee has pledged to keep its key interest rate at a record-low 0.5 per cent until unemployment, now at 7.4 per cent, falls to 7 per cent. The committee will leave the rate unchanged when it announces its next policy decision tomorrow, according to a Bloomberg survey. While values posted their strongest monthly gain since August 2009 in December, average UK home prices - at £175,826 - are about 5 per cent below their 2007 peak, according to Nationwide. In a sign of the buoyancy of London's property market, it said the average value in the capital of £345,186 is about 14 per cent above 2007 levels. Mortgage lender Halifax, part of Lloyds Banking Group, has forecast that home prices will increase between 4 per cent and 8 per cent this year. BoE Governor Mark Carney said policymakers were monitoring developments after they sought to put a curb on activity in November.