Westpac Banking Corporation (ASX:WBC) said business credit growth is set to resume in the next six months as a gradual pick-up in consumer spending flows through to the commercial sector, according to The Age.

Westpac Banking retail branch network head Rob Coombe predicts rising consumption by private households will also boost lending to business in late 2010.

Mr Coombe, who believes businesses will start investing again early next year on stronger retail sales figures, said retailers can expect a good Christmas after the improving economy increased household confidence.

A combination of confidence, low unemployment and continuing post-global financial crisis economic growth is convincing consumers to spend, he said.

Mr Coombe's optimistic outlook comes after business credit growth slumped in recent months as companies have reined in their own spending. Bank lending has been sustained by continued growth rates of 8 per cent per annum for home mortgage loans.

New loans to business are expected to pick up the slack from mortgage holders in the second half of the industry's current financial year as higher interest rates begin to reduce home loan demand.

Mortgage interest rates are set to rise by 0.25 per cent to 7 per cent as soon as the Reserve Bank of Australia lifts the official interest rate.

Westpac is anticipating a 25-basis point rise in the cash rate before Christmas. The rate rise could come as early as next week taking the headline rate to 4.75 per cent.