UK January mortgage approvals unexpectedly up

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The BoE said there were 74,000 mortgage approvals for house purchase last month, up from a downwardly revised 72,000 in December. That figure had been the lowest since current records began in 1999.

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

The BoE said there were 74,000 mortgage approvals for house purchase last month, up from a downwardly revised 72,000 in December. That figure had been the lowest since current records began in 1999.

Analysts had expected a reading of 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 in approvals.

The figures, although still historically weak, suggest the housing market could be stabilising after several months of cooling house price inflation and declining mortgage approvals.

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As such, the data may raise expectations the BoE will hold fire for a few months before cutting interest rates again.

However, mortgage lending posted its weakest rise since July 2005, up 7.416 billion pounds ($14.7 billion) 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.

Figures from the Nationwide building society showed further weakness in house price inflation, with prices falling 0.5 percent on the month in February, taking the annual rate down to 2.7 percent -- the weakest since November 2005.

The BoE said consumer credit rose more than economists had forecast, up 0.94 billion in January, picking up from December's 0.59 billion rise.

The BoE said final M4 money supply grew 1.4 percent on the month in January and 13.1 percent on the year.

(Reporting by Matt Falloon and Alastair Sharp)