May 30, 2012 / 12:52 PM / 5 years ago

UPDATE 1-UK housing market pick-up belies broader weakness

* Mortgage approvals and lending strongest since January

* Highest credit card repayments in more than 5 years

* BoE's Fisher warns euro zone break-up can't be ruled out

By Olesya Dmitracova and David Milliken

LONDON, May 30 (Reuters) - Britain's property market showed signs of a small bounce-back in April, with Bank of England data showing mortgage approvals rising to their highest since January, but broader lending figures suggested the overall economy remained weak.

Britain's economy is struggling to emerge from its second recession since the financial crisis with confidence hurt by the turmoil in the euro zone, and BoE policymaker Paul Fisher warned on Wednesday that it was impossible to rule out a break-up of the currency bloc.

Mortgage approvals numbered 51,823 in April, Bank of England data showed, up from 51,067 in March and well above analysts' forecasts. Net mortgage lending grew by 1.139 billion pounds, also above expectations and the biggest increase since January.

"There appears to be a very, very slow thaw going on in the housing market," said BNP Paribas economist David Tinsley.

Nonetheless, the figures are well below their pre-financial crisis levels, and in real terms property prices are still around 25 percent lower, with most economists forecasting them to remain broadly flat or slightly lower.

Any improvement is largely confined to London's property market, which is buoyed by foreign demand, as conditions outside the capital remain challenging.

British real estate developers Telford Homes and St. Modwen said the residential property market in London and the south-east of England remained robust and would underpin their growth in 2012.

The British housing market is also vulnerable to a hit from a deterioration in the euro zone, the stability of which is threatened by worries about Spain's banking system and uncertainty over Greek elections next month.

"We expect house prices to fall by around 3 percent by the end of 2012," said Howard Archer, economist at IHS Global Insight. "The risk that house prices could fall even more than this is currently being lifted by the increased downside risks to the UK economic outlook, particularly coming from the situation in Greece/euro zone."

This danger was reinforced by the BoE's executive director for markets, Paul Fisher, who told the Leicester Mercury newspaper that businesses should be aware of the dangers posed by the euro zone debt crisis.

"No one is trying to anticipate a euro break-up, but you just can't rule it out," he said.

Concerns about Britain's stuttering economy and turmoil in its biggest trading partner, the single-currency area, weighed heavily on consumers' minds, with Britons repaying a net 118 million pounds on their credit cards in April - the biggest net repayment since August 2006.

Overall net lending - which includes mortgages as well as consumer credit - rose by 1.407 billion pounds, less than the 1.728 billion pound increase in March.

Consumer credit grew by just 268 million pounds, down from 741 million pounds in March, suggesting that the retail sector is likely to remain under pressure, despite Tuesday's relatively upbeat news from the Confederation of British Industry.

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