September 30, 2013 / 8:32 AM / 6 years ago

UK mortgage approvals hit 5-1/2 year high in August

LONDON, Sept 30 (Reuters) - British mortgage approvals for house purchases hit their highest level in more than five years last month, a latest sign of recovery in the housing market, but lending to companies fell.

Mortgage approvals numbered 62,226 in August, the highest since February 2008 and up from 60,914 in July, Bank of England data showed on Monday.

Analysts in a Reuters poll had forecast a reading of 61,350.

Britain’s housing market has shown signs of recovery, driven by strong gains in and around London.

House prices in England and Wales posted their biggest month-on-month gain in more than six years in September, a survey showed earlier on Monday.

The Bank of England has said it does not see signs of a bubble in the housing market because activity remains below its levels before the recession.

In the run-up to the 2008 financial crisis, monthly mortgage approvals ran at around 90,000.

Prime Minister David Cameron said on Saturday his government was bringing forward to this week the launch of a programme to make it easier for home buyers to get mortgages.

Last week, finance minister George Osborne asked the central bank to play a bigger role in making sure that the Help to Buy programme does not fuel a new boom.

The BoE said net mortgage lending, which lags approvals, rose by 974 million pounds, slightly above forecasts.

Lending to non-financial businesses fell by 3.76 billion pounds in August, after a 466 million-pound rise in July. It was the largest fall since December last year. Lending to small businesses alone fell by 678 million pounds.

The BoE and Britain’s government have tried to encourage more lending to firms, especially smaller companies, with their Funding for Lending Scheme.

A survey by professional services firm Deloitte showed on Monday that bank borrowing has become a lot more attractive to major companies in Britain in the last year and now matches the appeal of bond issuance.

Unsecured lending to consumers rose by 577 million pounds, roughly in line with expectations. Market research company GfK reported on Friday that consumer sentiment rose to a nearly six-year high in September.

The BoE’s preferred gauge of money supply, M4 excluding intermediate other financial corporations, rose 0.4 percent, taking the annual growth rate to 4.3 percent.

Interest rates on new business loans edged up in August, the data showed.

The BoE has said it is watching out to make sure financial conditions - including effective interest rates - do not tighten and smother Britain’s economic recovery.

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