Nationwide said it expected growth in British house prices to slow further to just 1 percent in 2018.

Britain's housing market has weakened since the country voted in 2016 to leave the European Union. A fall in the value of the pound after the Brexit referendum pushed up inflation and added to pressure on the finances of many households.

Nationwide said British house prices rose by 2.6 percent in the 12 months to December, slower than growth of 4.5 percent in 2016 but stronger than a median forecast of a 2.0 percent rise in a Reuters poll of economists.

In monthly terms, prices also rose more strongly than expected, up 0.6 percent from November and the biggest increase since June last year.

In London, prices fell by 0.5 percent in 2017 and the capital was the weakest region across Britain for the first time since 2004, Nationwide said.

(Writing by William Schomberg; editing by John Stonestreet)