LONDON, March 18 (Reuters) - Prices of homes put up for sale in Britain have risen by the most in nearly a year as the housing market recovery boosts the confidence of sellers, with London seeing the biggest increase in demand, an industry survey showed on Monday.

Property website Rightmove said asking prices for residential properties rose by 1.5% in the four weeks to March 9, the strongest four-week increase in 10 months, although they remained nearly 5,000 pounds ($6,400) below their May 2023 peak.

Prices were 0.8% higher than a year earlier.

"Sellers are right to feel more confident and optimistic this year, but buyer affordability remains stretched and higher mortgage rates are an ongoing challenge," Tim Bannister, Rightmove's director of property science, said.

Rightmove's measure of buyer demand in the period between Feb. 11 and March 9 was up by 8% compared with a year earlier, and sales were up by an annual 13%.

However, there were still signs of caution among buyers. Sellers took on average 71 days to find a buyer, the longest for the time of year since 2019.

Demand in London was stronger than anywhere else as people increasingly worked from their offices rather than at home and home-buyers were boosted by stronger wage growth and lower inflation, Rightmove said.

After a slowdown, Britain's property sector has gathered some steam in recent months as mortgage interest rates fell on expectations that the Bank of England would lower borrowing costs this year.

More recently, borrowing costs have increased again as investors judged the BoE may not cut rates until the second half of the year. Rightmove said the interest rate on a typical five-year fixed-rate mortgage had risen over the past five weeks to 4.84% from 4.54%. ($1 = 0.7852 pounds) (Reporting by William Schomberg; editing by David Milliken)