British consumer credit and mortgage lending rose more than expected in May, official figures showed yesterday, suggesting that consumption and the housing market may still have some strength left in them.

The Bank of England said net consumer credit rose £1.8 billion in May, more than the £1.6 billion expected and a sharp pickup from the £1.3 billion in April.

The data could dampen market expectations that the BoE will soon cut interest rates from 4.75 per cent as they suggest that consumer spending - a key risk to the economic outlook - and the property market are still holding up.

Mortgage lending rose by just under £8 billion, also more than the 7.4 billion forecast by economists and up from £7.3 billion in April.

Separate figures on mortgage approvals, loans agreed but not yet made and often seen as a leading indicator of the housing market, rose slightly to a 10-month high of 96,000 from 95,000 the month before.

While still down more than 20 per cent on the 122,000 a year earlier, the approvals figures suggest that the housing market is at worst moving sideways and not weakening significantly.

"The report is consistent with the household sector treading water. It doesn't show a big consumer recovery but nor does it show a collapse in activity. There is nothing here to encourage the MPC to cut rates promptly," said Philip Shaw, chief economist at Investec in London.

Interest rate futures ticked lower after the data were released, scaling back slightly expectations for a future interest rate cut.

Many British retailers have bemoaned lacklustre consumer spending in recent months but policymakers have repeatedly said the slowdown may be temporary.

Minutes of the BoE's June rate-setting meeting showed that policymakers thought consumer spending growth had stabilised after a downturn.

Yesterday's data showed a rebound in credit card lending, up £800 million in May, the biggest increase since January and up sharply from a £358 million rise in April.

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