LONDON (Reuters) - British house prices rose for the first time since October 2007 in March, the Nationwide Building Society said yesterday, but the lender cautioned against jumping to conclusions about a housing market rebound.

Nationwide said house prices rose 0.9 percent on the month in March after a 1.9 percent drop in February, taking the average price of a house up to £150,946 ($216,500).

The annual rate of decline eased to 15.7 percent last month compared with a 17.6 percent fall in February.

The pound rose a quarter of a cent against the dollar after the figures, which analysts said provided a glimmer of hope the housing market may be nearing a floor, although a full recovery was still some way off.

"If you set this alongside the improvement in mortgage approvals and the rise in buyer enquiries that RICS has been showing, there are tentative indications the housing market may be stabilising," said Simon Hayes, economist at Barclays Capital.

"It may be six months to a year before we see a durable recovery."

Britain's housing market has taken a pounding during the credit crisis and resulting economic downturn as banks shied away from risky lending.

But there have been a few tentative signs that the market may be stabilising at historically low levels.

The Royal Institution of Chartered Surveyors' monthly survey has shown rising interest from prospective buyers for some months now. And Bank of England data this week showed approvals for new mortgages rose to 38,000 in February, their highest in nearly a year.

But that is still well below long term averages and analysts say prices will fall further before any recovery begins as it will take time for cuts in interest rates to a record low of 0.5 percent and the BoE's quantitative easing plan to work.

Rising unemployment also poses a threat to a quick recovery in the housing market.

Nationwide chief economist Fionnuala Earley said the moderation in the March annual rate was distorted by conditions last year, so no strong conclusions could be drawn from it.

"The current upturn in activity is therefore more likely to reflect the return of buyers who have delayed purchasing through the worst of the financial turbulence at the end of 2008 rather than the beginnings of a swift recovery," Earley said.

"Nevertheless, the willingness of borrowers to return to the market is encouraging and likely to in part reflect the falling cost of borrowing."