By David Milliken

LONDON (Reuters) - The number of house purchases in Britain this year is on course to drop by 21% to its lowest since 2012 as a result of rising borrowing costs, property website Zoopla forecast on Wednesday.

Zoopla forecast there would be 1.0 million residential housing sales this year, down from 1.26 million last year and a 14-year high of 1.48 million in 2021, when ultra-low interest rates and pandemic tax incentives boosted demand.

"While UK house prices are 0.1% higher over the year, it is the number of sales that have been hit hardest by higher borrowing costs, especially amongst mortgage-reliant buyers," Zoopla's executive director, Richard Donnell, said.

Zoopla forecast that house purchases funded by mortgages would drop 28% this year, while cash buyers would fall just 1% and account for more than a third of sales.

The most recent official data showed that there were 22% fewer house purchases in the three months to the end of June than a year earlier.

Average house prices in May were down 2% from their peak last September, but were still more than 20% higher than before the start of the COVID-19 pandemic, when cheap finance and demand for more spacious homes drove a surge in prices in many Western countries.

Since December 2021, the BoE has raised interest rates 14 times to 5.25% - their highest since 2008 - from 0.1% in a bid to tackle rampant inflation, and markets expect two further rate rises to 5.75% this year.

The BoE is due to release July mortgage lending data at 0830 GMT.

Zoopla provides property valuations and also advertises more than 1 million properties for sale or to rent.