House prices in Britain jumped 1.1 percent in July and fell at their slowest annual rate in more than a year, mortgage lender Halifax said, as it halved its forecast for house price falls this year.

The lender said house prices in July were 9.9 percent down from a year ago, the smallest annual fall since June 2008 and a marked improvement from the 18.9 percent annual drop recorded in December.

Halifax parent Lloyds Banking Group said it now expected house prices to fall 7 percent or less this year, compared with an earlier forecast for a decline of 15 percent.

Wednesday's survey tallies with one by rival lender Nationwide which showed prices rose 1.3 percent on the month and fell at their slowest pace since last June and suggest the decline in housing market activity may be starting to level off.

It will also provide some food for thought to Bank of England policymakers, who start their two-day policy meeting today and will decide whether or not to expand their 125 billion pound asset purchase programme which ran out last week.

However, Halifax cautioned against reading too much into last month's rise in prices, warning that the housing market remained vulnerable.

"I wouldn't want to get too excited about the improvement this month because the housing market still faces considerable headwinds," Halifax economist Martin Ellis told Reuters.

"Unemployment is rising sharply and is expected to keep rising for some time and there's a shortage of mortgage credit available and I don't see that changing dramatically in the near term."          

Official data last week showed that while mortgage approvals rose in June to their highest since last April, new mortgage lending rose much less than expected and overall bank lending to households was its weakest in 15 years.

And with banks under pressure to curb their losses, lending is likely to be tight for a while yet. -Reuters