Mortgage approvals pick up

By Matt Falloon and Alastair Sharp

LONDON (Reuters) - Mortgage approvals unexpectedly picked up in January from a series low, but mortgage lending posted its weakest rise in two and a half years, according to Bank of England data on Friday.

The Bank said there were 74,000 mortgage approvals for house purchases last month, up from a downwardly revised 72,000 in December. December's figure was the lowest since current records began in 1999.

Analysts had expected a further fall to 70,000 and the surprise pick up in the forward looking indicator for the housing market brings an end to a run of seven months of declines.

"January's household borrowing figures suggest that housing market activity has stabilised, at least temporarily," said Vicky Redwood, an economist at Capital Economics.

The Bank is expected to hold fire on further interest rate cuts until the middle of the year, having cut borrowing costs earlier this month, but rates may have to come down sooner if the economy deteriorates sharply.

Many analysts believe the housing market will weaken further this year as the global credit crunch starts to feed through to households.

Indeed, mortgage lending posted its weakest rise since July 2005, up 7.416 billion pounds in January, compared to a rise of 7.915 billion in December. Analysts had forecast a rise of 8.1 billion pounds.

Mortgage lending also rose at its weakest annual rate since October 2001, up 9.7 percent.