UK mortgage approvals dip in February, business lending contracts again

British mortgage approvals slowed in February by more than expected, possibly reflecting bad weather during the month, and there was another contraction in business lending.

The Bank of England said on Monday mortgage approvals numbered 70,309 in February, the lowest since October last year.

It also represented a sharp fall from 76,753 in January, which was the highest in more than six years.

Analysts had forecast a slight fall in approvals to 75,250 as heavy rain and flooding in some parts of the country hampered business.

Britain's economy in 2013 had its best year of growth since the financial crisis. And while the recovery so far has been largely driven by housing and the consumer sector, there have been signs that trade and business investment are starting to pick up.

The BoE data showed another fall in business lending, down 750 million pounds compared with the previous month. Nonetheless, that was a slower pace of decline than in January.

Lending to small businesses alone rose by 159 million pounds.

Mortgage approvals are still short of levels of around 90,000 a month seen before the 2008 financial crisis, but house prices are rising rapidly, up around 10 percent on the year by some measures.

Last Thursday, the BoE urged banks to consider the risk of future spikes in interest rates when they approve mortgages and said it was preparing tools to rein in potentially dangerous lending.

BoE Governor Mark Carney and other officials have played down suggestions that thehousing market is overheating. The Bank refocused its Funding for Lending Scheme away from mortgage lending and dedicated it exclusively to business lending at the start of this year.

Unsecured lending to consumers rose by 552 million pounds, slightly weaker than the forecast for 700 million pounds in the Reuters poll.

The BoE's preferred gauge of money supply, M4 excluding intermediate other financial corporations, rose 0.7 percent on the month, the biggest increase since August 2012, taking the annual growth rate to 3.7 percent. (Reporting by Andy Bruce and William Schomberg)