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UK house prices fall in Sept - Nationwide

LONDON, Oct 2 (Reuters) - British house prices unexpectedly fell in September, data from mortgage lender Nationwide showed on Tuesday, adding to a recent string of disappointing economic news.

House prices fell 0.4 percent on the month following a downwardly revised 1.1 percent bounce in August, Nationwide said. House prices are now 1.4 percent below last September's level.

Economists had forecast an unchanged reading on the month and an annual decline of 0.8 percent.

Data from the Bank of England showed on Monday that mortgage lending fell in August, and that the number of mortgage approvals remained weak despite the central bank's new scheme to get credit flowing to businesses and consumers.

However, Nationwide's chief economist Robert Gardner struck a cautious note of optimism after the BoE's credit conditions survey indicated banks wanted to make more mortgages available.

"Looking forward, policy measures such as the Bank of England's Funding for Lending Scheme should provide support for activity in the housing market by ensuring the availability of credit and lowering its cost," Gardner said.

"Overall, we expect the UK economy to see a gradual recovery over the next 12 months, with house prices remaining relatively flat or declining only modestly over the same period," he said.

A Reuters poll showed last week that economists predicted a decline in house prices of 1.1 percent in 2012 and unchanged prices for 2013.

(Reporting by Sven Egenter; Editing by Hugh Lawson)

((sven-markus.egenter@thomsonreuters.com)(+44)(20)(7542

7708)(Reuters Messaging: sven-markus.egenter.thomsonreuters.com@reuters.net))

Keywords: BRITAIN PROPERTY/NATIONWIDE