July 29 (Bloomberg) -- U.K. mortgage approvals climbed to a 14-month high in June, adding to signs the housing market is recovering as the recession eases and banks become more willing to lend.

Banks granted 47,584 home loans, compared with 44,169 in May, the Bank of England said today in London. Economists predicted 47,000, according to the median of 21 forecasts in a Bloomberg News survey.

House prices held their value for a third month in July, according to a survey of real-estate agents by Hometrack Ltd. Central bank policy maker Andrew Sentance said last week the bank may consider a pause in its 125 billion-pound ($207 billion) bond-purchase plan if economic forecasts published next month point to a recovery.

“We’re expecting to see mortgage approvals rise as the banking crisis begins to ameliorate,” said George Buckley, an economist at Deutsche Bank AG in London. “The bank will be mildly encouraged by these figures. I don’t see a change in the bond purchases or in rates.”

The pound was little changed after the report at $1.6361 as of 10:30 a.m. in London.

Net lending secured on dwellings rose to 343 million pounds from 331 million pounds in May, while net lending to consumers fell to 71 million pounds from 153 million pounds. Credit card lending rose by 167 million pounds.

Gross mortgage lending was 1.98 billion pounds in June, the highest level this year, the Building Societies Association said today in a separate report. That’s 30 percent more than in May and 40 percent lower than a year earlier.

Stable House Prices

The average house price in England and Wales held at 155,600 pounds this month, Hometrack Ltd., a London-based property research company, said July 27. The reading is still down an annual 7.7 percent.

Sentance said last week there may be “some evidence of positive growth in the second half of the year,” and the bank may shift to a “watching” stance next month on their plan to ease credit strains in the economy.

The bank kept the key interest rate at a record low of 0.5 percent this month and voted for no change in the asset-purchase arrangements. Policy makers make their next decision on the key rate and so-called quantitative easing on Aug. 6.

M4, the broadest measure of U.K. money supply, fell 0.2 percent in June and was 13.8 percent higher than a year earlier. The annual rate of increase was revised from a previous estimate of 14.2 percent.

The bank also reported a separate measure of M4 that excludes financial companies that specialize in intermediating between banks, such as bank holding companies and non-bank credit grantors.

On this measure, money supply shrank 0.6 percent in June compared with an expansion of 0.1 percent in May. For the three months through June, the growth rate fell to 2.4 percent from 4.4 percent in the period through May.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Last Updated: July 29, 2009 05:36 EDT