(fxcue news) - UK mortgage approvals increased to a two-year high in August as demand improved with easing interest rates, official data revealed on Monday. Mortgage approvals for house purchase rose to 64,900 in August from 62,500 in July, the Bank of England said. This was the highest level since August 2022 and was also above forecast of 64,000. The 'effective' interest rate, the actual interest paid on newly drawn mortgages rose to 4.84 percent from 4.81 percent in July. Net consumer credit climbed slightly to GBP 1.3 billion from GBP 1.2 billion in the prior month. This was driven by higher net borrowing through other forms of consumer credit, which rose to GBP 0.8 billion in August from GBP 0.7 billion in July. Meanwhile, net borrowing through credit cards was little changed at GBP 0.5 billion. Consumer credit posted an annual growth of 7.6 percent after a 7.8 percent rise seen in July. Net borrowing of mortgage debt by individuals came in at GBP 2.9 billion compared to GBP 2.8 billion in July. Net mortgage lending rose for the sixth consecutive month, to 0.7 percent, the highest since August 2023, data showed. Capital Economics economist Ashley Webb said money and lending data provide further evidence that the gradual improvement in credit demand and supply in response to the falls in lending rates is supporting the economy. But the BoE will probably need to cut interest rates much further, perhaps to 3.00 percent by early 2026, before credit growth picks up significantly, the economist noted. Earlier this month, the BoE had maintained its interest rate at 5.00 percent after cutting it by a quarter point at the August meeting. Further, data released by the Nationwide Building Society today showed that house price growth accelerated to 3.2 percent in September from 2.4 percent in August. On month, the house prices gained 0.7 percent, in contrast to the 0.2 percent drop in the previous month.