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Last Updated: Monday, 31 July 2006, 09:45 GMT 10:45 UK
Mortgage approvals rise in June
Browsing at an estate agent
House price inflation has beaten forecasts in 2006
New mortgage approvals reached 120,000 in June, official figures have shown - the highest level for five months.

The Bank of England (BoE) said that approvals were 3,000 higher than May's figure, although total new mortgage debt was slightly lower in June.

House price inflation in the UK during 2006 has outstripped most analysts' forecasts, and the BoE figures suggest this trend is continuing.

But the BoE added that new lending on credit cards was at a 12-year low.

Market strength

The figures do tend to highlight the strength of the mortgage market and the housing market in general
Philip Shaw, Investec
The BoE's figures will support the views of many observers that at present, consumers seem more comfortable investing in property than using credit cards to fund High Street spending.

"The figures do tend to highlight the strength of the mortgage market and the housing market in general," Philip Shaw, economist at Investec said.

"The report is more of a confirmation of a general picture that we know already... Consumer credit is still exhibiting a slowing trend."

Last month, the BOE revealed that mortgage debt had topped 1 trillion for the first time.

However, the value of unmortgaged property across the UK is much higher at about 3.6 trillion.

But the housing market may slow substantially if the BoE's monetary policy committee chooses to increase interest rates soon.

Howard Archer, economist at Global Insight, said that even a small increase in interest rates could spark a slowdown.

"House buyers will be concerned by the very real possibility that interest rates could increase before the end of the year, as this would further stretch affordability.

"Indeed, even a small increase in interest rates could have a significant dampening impact on housing market activity, given stretched affordability," Mr Archer said.

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