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IN PHOTO: A woman walks past a new residential property development in London, March 21, 2013. British finance minister George Osborne said on Thursday that new measures to boost home ownership did not risk causing a repeat of the housing bubble that helped usher in the country's financial slump five years ago. On Wednesday, he announced plans to guarantee 130 billion pounds of mortgages from 2014 for three years, allowing banks to provide more loans to people without big deposits. The government also committed 3.5 billion pounds ($5.3 billion) over three years to shared equity loans for new-build homes worth less than 600,000 pounds, allowing buyers to purchase them with a 5 percent deposit. REUTERS/Neil Hall

Good news for UK housing market as mortgage lending paced up last month. However, a plunge in lending to businesses was indicative of a recovery that the country’s economy needs.

The housing market has been able to regain its momentum as value of mortgage lending reached an all-time high in almost seven years. According to Bank of England figures, increase in the lending is due to renewed rise in mortgage approvals.

Mortgage approvals, which kept declining last year due to implementation of stricter rules on mortgage lending, rose last month to 66,582 from 64,826 in May. Net mortgage lending, which lags approvals, rose AU$5.60 billion in June, the biggest increase since July 2008, reports Reuters.

Meanwhile, central bank reports consumer credit has also been picking up steadily and is showing the possibility of some policymakers voting in favour of an interest hike next week. However, the data released also showed that lending to non-financial businesses dropped by AU$11.76 billion monthly, which is believed to be the highest decline since May 2011

British policymakers have showed concern over the volatile nature of lending and said business lending needs improvement in the wake of a renewed British economy. This month, finance minister George Osborne announced that he was giving a new remit to the Bank of England's Financial Policy Committee that specifically focused on the significance of banks lending required for productive investment.

IHS Global Insight economist Howard Archer, while pointing to an improvement in loans for small businesses, said that since June, big firms are showing more interests in funding than in lending, which the analysts think partially contributes to the declining business lending. "It is notable that the fall in lending was concentrated in lending to larger companies, which the British Bankers' Association reported have been making use of capital market finance in preference to bank borrowing," he said.

Barclays economist Fabrice Montagne believes that mortgage activities will improve further in coming months. The Bank of England also reported a growth in consumer credit by

The BoE said consumer credit grew by AU$2.61 billion in June -- slightly more than expected and nearly grew 7.6 percent year-on-year, the biggest growth since April 2006. However, Britain economic recovery still relies on household spending despite low rise in wages.

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