(Adds details and background) LONDON, May 20 (Reuters) - Britain’s pandemic-driven housing boom is likely to cool when tax incentives are withdrawn but changes to the market caused by COVID might keep pressure on demand, a Bank of England policymaker said on Thursday. House prices rose in the 12 months to March by more than 10% in annual terms - the sharpest increase since August 2007 - spurred by demand for bigger homes as more people work from home, as well as the government’s support measures, data showed. “One would expect the market to cool down when public support to the economy in general and the housing market in particular is withdrawn over the course of the year, as is currently planned,” Jon Cunliffe, a deputy governor at the BoE, said in a speech to the Law Society. But there may also be reasons to think that the pandemic might result in more persistent drivers of demand for housing, which means the housing market might not return to its pre-pandemic state, once tax incentives have disappeared, he said. House prices rose 5.7% across advanced economies during 2020, according to the Federal Reserve Bank of Dallas, the sharpest growth since 2007. The British housing market was boosted further this March when finance minister Rishi Sunak extended a cut to property purchase taxes that will be phased out over the second half of 2021, and announced a new mortgage guarantee scheme for first-time buyers who cannot afford large deposits. Cunliffe said past examples of temporary cuts to property purchase taxes - known in Britain as stamp duty holidays - had resulted in a cooling in the housing market upon their expiry. If a housing market boom took place, measures by the BoE’s Financial Policy Committee (FPC) would lean against it, Cunliffe said. “If ... the self-reinforcing dynamics of past periods began to re-emerge – strong demand, fast growth of prices relative to incomes, easy credit conditions and high levels of transactions – the FPC’s measures would certainly begin to have a stronger impact in constraining the increase in aggregate mortgage indebtedness,” he said. “But that, of course, is what they are intended to do.” (Reporting by Andy Bruce Editing by William Schomberg and Giles Elgood) Our Standards: The Thomson Reuters Trust Principles.