LONDON, Feb 1 (Reuters) - British house prices dropped by a bigger-than-expected 0.6% in January and are now 3.2% below their peak in August, on a seasonally adjusted basis, mortgage lender Nationwide Building Society said on Wednesday.

House prices in January were 1.1% higher than they were a year earlier, down from a 2.8% increase in December and a rise of 1.9% expected in a Reuters poll of economists. (Reporting by David Milliken; editing by Sarah Young)