By Andy Bruce and David Milliken
LONDON (Reuters) -British lenders approved more mortgages than expected in June and net unsecured lending to consumers shot up by the most in over five years, despite rising interest rates, Bank of England data showed on Monday.
Banks and building societies approved 54,662 mortgages in June, the most since October 2022 when the housing market faltered after a surge in bond yields caused by then-Prime Minister Liz Truss' tax cut plans, Bank of England data showed on Monday.
A Reuters poll of economists had pointed to approvals of 49,000, after 51,143 mortgages were approved in May.
Despite June's increase, the housing market is likely to weaken further in the months ahead thanks to much higher borrowing rates on mortgages that reflect past interest rate hikes from the BoE, as well as expectations for future ones.
"The rise in mortgage approvals probably represents a scramble to secure a deal before cheaper mortgage products were pulled from the market in the wake of the surge in interest rate expectations at the end of May," said Thomas Pugh, economist at accountants RSM UK.
Monthly mortgage approvals are still running lower than the 2010-2019 average of around 60,000.
RSM forecast a 10% peak-to-trough fall in house prices. According to official data, house prices in May were just 2% lower than their peak in September 2022.
The value of net mortgage lending for the second quarter as a whole fell compared with the first quarter - the first quarterly contraction since records began in 1987.
The BoE is expected to raise interest rates to 5.25% on Thursday from 5.0%, which would be the highest Bank Rate since 2008.
"Looking ahead, growth in households' real disposable incomes will be weighed down by mortgage refinancing," said Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics.
The BoE reported a 1.661 billion pound ($2.13 billion) monthly increase in net consumer lending June, the largest such increase since April 2018.
The increase was driven mostly by the "other" lending category, which comprises personal loans and car finance deals, the latter potentially boosted by a jump in new car sales in June.
($1 = 0.7791 pounds)