LONDON, Aug 6 (Reuters) - British house prices rose in July after falling in June as demand for bigger homes following pandemic lockdowns helped to soften the impact of a reduced tax break for buyers, mortgage lender Halifax said on Friday. House prices last month were 0.4% higher than in June when they fell by a monthly 0.6%, Halifax said. In annual terms, prices were 7.6% higher than in July 2020, the slowest rise since March. Russell Galley, Halifax managing director, said he expected the market to settle after the recent buying surge which was driven by the tax incentive, but a shortage of home on the market was likely to support prices. Under the incentive scheme, the first 500,000 pounds ($696,000) of any property purchase in England or Northern Ireland were exempt from the stamp duty tax until the end of June. A 250,000 pound tax-free allowance is now running until the end of September. Galley said the recovery in the economy from its coronavirus shock and higher confidence among consumers suggested annual price growth, while slowing, would remain "well into positive territory by the end of the year." Rival mortgage lender Nationwide said last week its measure of house prices showed a monthly fall of 0.5% in July, the first drop since March. That slowed the annual increase to 10.5% from June"s leap of 13.4%, the steepest in 17 years. read more ($1 = 0.7184 pounds)