Strong mortgage data shows housing market robust

By Fiona Shaikh and Sumeet Desai

LONDON (Reuters) - Mortgage lending growth gathered pace in June and approvals for home loans held steady in a sign that a string of interest rate rises has not cooled the housing market.

The Bank of England said lending secured on dwellings rose by 9.550 billion pounds last month after an 8.752 billion pounds rise in May.

Mortgage approvals -- a leading indicator for the housing market -- numbered 114,000 for the second consecutive month when economists had expected them to fall.

Still, the figures failed to alter expectations the central bank will hold borrowing costs at 5.75 percent this week as policymakers take time to weigh up the recent financial market turmoil and the impact of the last five rate increases.

"It doesn't change the outlook for this week's interest rate decision, but if we don't see a slowdown in the next few months it will add to the argument for rates rising to 6 percent," said David Page, economist at Investec.

Monday's numbers, however, contradict recent surveys suggesting the housing market is coming off the boil but policymakers have themselves noted that signs of slowdown so far are at best tentative.

The latest survey from mortgage lender Nationwide showed house prices virtually stagnated this month but were still up nearly 10 percent on the year. Data from property consultants Hometrack earlier on Monday also showed house price inflation slowing.

"It is early days yet, and we suspect that a more sizeable decline in approvals will materialise in the coming months as the rise in interest rates and slow disposable income growth take their toll on affordability," said George Buckley, chief UK economist at Deutsche Bank.