Aug. 30 (Bloomberg) -- U.K. banks approved more mortgages in July than economists had expected, a sign five interest-rate increases in a year have yet to curb demand from borrowers.

Lenders granted 115,000 loans for house purchase last month, the same as in June, the central bank said in London today. The June figure, the most since February, was revised up by 1,000. Economists had forecast a drop in approvals to 110,000, according to the median of 24 estimates in a Bloomberg survey.

Today's report suggests interest rates at a six-year high have yet to deter British consumers from adding to a record 1.35 trillion pounds ($2.7 trillion) of debt. House prices are showing signs of cooling, even as investors scaled back bets of another increase in borrowing costs amid a global credit crunch.

``Interest rate rises aren't making themselves felt as much as you would expect,'' Vicky Redwood, an economist at Capital Economics Ltd., said before the report. ``The Bank of England still has room for a further hike.''

Investors have scaled back bets on a further increase in borrowing costs after concern about subprime loans in the U.S. tightened credit around the globe. Economists at banks including Barclays, JPMorgan Chase & Co. and Citigroup Inc. have since cut their predictions for further rate increases.

The implied rate on the December U.K. interest-rate futures contract was 6.29 percent at 9:34 a.m. today. The contract settles to the three-month London interbank offered rate for the pound, which for the past decade averaged about 15 basis points more than the central bank benchmark, now 5.75 percent.

More Loans

Net consumer credit rose 1.095 billion pounds in July, the most since November and up from the 971 million pounds extended in June, the central bank said. The value of mortgage lending eased to 9.19 billion pounds from 9.34 billion pounds.

Net borrowing on credit cards rose by 224 million pounds, less than the gain of 255 million pounds recorded in June. Borrowing on personal loans and overdrafts accelerated by 870 million pounds compared with a 716 million pound increase the month before, the report showed.

Overall, M4, the broadest measure of money supply including deposits at banks and currency in circulation, rose 1 percent in July after a 0.7 percent increase in June. The annual rate of M4 growth accelerated to 13 percent, the most since May, from 12.9 percent in June, the bank said.

Housing Slowdown?

Still, reports are showing the housing market may be starting to cool. Hometrack said Aug. 24 U.K. house prices were unchanged this month, the worst performance since November 2005. Rightmove Plc, Britain's biggest real-estate Web site, reported Aug. 20 that London house prices fell for the first time in a year this month.

Nationwide Building Society said today that house price inflation eased to 9.6 percent from a year ago in August from 9.9 percent in July.

Consumer spending has yet to show signs of slowing, as it continues to boost U.K. economic expansion. Gross domestic product growth quickened to 0.8 percent in the second quarter, putting it on course for the best performance in three years, a government report showed Aug. 24. Consumption rose 0.8 percent in the period, the most since the final three months of 2006.

The Bank of England will begin a two-day meeting next week. Policy makers will keep the rate unchanged, according to the forecasts of all 37 economists in a Bloomberg News survey.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.

Last Updated: August 30, 2007 04:38 EDT