REFILE-UPDATE 1-UK current account gap shrinks as Q4 GDP growth confirmed

(Refiles, adding dropped word 'gap' in headline)

* Current account gap undercuts all Reuters poll forecasts

* Q4 GDP stays at +0.4 pct, ONS hikes 2017 GDP to +1.8 pct

* Savings ratio in 2017 hits new record low

* Separate data shows weak picture for housing market

LONDON, March 29 (Reuters) - Britain's current account deficit was much smaller than expected last year, its statistics office said on Thursday, potentially easing concerns about the country's reliance on foreign investors to fund itself as Brexit nears. The Office for National Statistics also confirmed economic growth slowed slightly at the end of 2017 though the dominant services sector picked up a bit at the start of this year. The current account deficit stood at 18.4 billion pounds ($25.9 billion) in the fourth quarter, much lower than a median forecast of 24 billion pounds in a Reuters poll of economists and below all forecasts in the poll. That left the full-year deficit at 82.9 billion pounds or 4.1 percent of GDP, the narrowest as a share of the economy since 2011 and down sharply from a record high of 5.8 percent in 2016. "The UK's deficit with the rest of the world shrank as the UK received increased earnings on foreign investment thanks to a growing world economy," ONS statistician Rob Kent-Smith said. Bank of England Governor Mark Carney has said Britain's balance of payments shortfall leaves it reliant on the "kindness of strangers". The country's official budget forecasters said this month they expected the gap to fall only slowly in coming years, and that the confidence of overseas investors could be damaged if Britain's departure from the European Union was disorderly. The ONS confirmed gross domestic product grew 0.4 percent on the quarter - slowing from 0.5 percent in the third quarter - and 1.4 percent compared with the last three months of 2016. For 2017, the ONS raised its economic growth estimate to 1.8 percent from 1.7 percent previously. However, the annual rate remained the lowest since 2012 and Britain continues to lag behind stronger growth in other rich economies, hurt by the hit to consumer spending after the 2016 Brexit vote which weakened the pound and pushed up inflation. The ONS said disposable household incomes, adjusted for inflation, only inched up 0.1 percent in the fourth quarter. The savings ratio for 2017 was the lowest on record at 4.9 percent of gross disposable income, and the ONS said households were net borrowers for the first time since records began in 1987. Separate data on Thursday showed Britain's housing market remained soft, reflecting the financial squeeze on many households. The Bank of England said the number of mortgages approved for house purchase fell to 63,910 in February from 67,110 in January, below economists' forecasts of a smaller drop to 66,000 in a Reuters poll. Mortgage lender Nationwide said house prices in Britain rose at the slowest pace in seven months in March. The ONS said Britain dominant services sector grew by a monthly 0.2 percent in January, picking up some speed. Over the three months to January, growth of 0.6 percent was the fastest since the end of 2016. ($1 = 0.7115 pounds)

(Additional reporting by Andy Bruce and Elizabeth Burden Writing by William Schomberg; editing by John Stonestreet)