The number of mortgage approvals in September were at their highest in more than two years, the Bank of England said yesterday, reinforcing expectations its monetary policy committee will increase interest rates to 5 per cent next month.

The loan data are considered by analysts to be a good lead indicator of future housing market activity and show that homebuyers have not been put off by the Bank's surprise 0.25 percentage point rise in the cost of borrowing in the summer.

The number of loans approved for house purchase last month hit 126,000 compared with 120,000 in August. This was well above the previous six- month average of 117,000 and was much stronger than the 118,000 level expected by economists.

"The housing market could well be an important factor behind the Bank of England's expected decision to raise interest rates next week," said George Buckley at Deutsche Bank.

Source:  Financial Times