U.K. house prices rose 1.2 percent during January to push them 8.6 percent higher from a year ago, a major mortgage lender said Friday, while a separate survey showed consumer confidence picked up after a three-month drop.

The report from the Nationwide Building Society added to evidence that the housing market has been recovering, though at a slow pace, as Britain barely crawled out of recession in the fourth quarter.

Martin Gahbauer, the bank's chief economist, said this reversed the pattern at the start of recession when Britain's housing market collapsed faster than the economy as a whole.

Britain's recession officially ended in the fourth quarter as GDP rose by 0.1 percent after six quarters of decline, according to preliminary data released this week.

Although unemployment eased in November to 7.8 percent from 7.9 percent a month earlier, Gahbauer said other trends in the labor market would tend to hold back future gains in house prices.

"Over the course of 2009, U.K. average earnings growth has fallen to the lowest levels on record, as many employers have opted to spread their cost reduction measures over a wider segment of the work force by freezing or reducing pay," he said.

"With pay inflation near zero or even negative, every additional increase in house prices worsens housing affordability, particularly since interest rates are very unlikely to fall any further. All else being equal, this limits the upside potential for the current recovery in house prices," he added.

Another report released Friday indicated that consumer confidence rose in January after a three-month decline.

The Gfk/NOP Consumer Confidence survey found that respondents were overall still pessimistic by a score of minus 17, meaning the proportion of pessimists was 17 points higher than the proportion of optimists. The number of those who were optimistic about the economy in the next 12 months was minus 2, compared to minus 6 in December.

Nick Moon of Gfk/NOP Social Research noted that the index was 20 points higher than a year ago. The survey was based on interviews with 1,993 people aged 16 and over between Jan. 8 and Jan. 17, with a margin of error of plus or minus 2 percentage points.

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On the Net: http://www.nationwide.co.uk/hpi/historical/Jan—2010.pdf