UPDATE 1-Sterling rises on strong UK mortgage data

Tue Dec 24, 2013 7:40am EST

By Shadi Bushra

LONDON Dec 24 (Reuters) - Sterling edged up on Tuesday as strong British mortgage data added to concerns that the housing market may be overheating, reinforcing expectations the Bank of England may raise rates sooner than previously expected.

The number of mortgages extended for home buying rose to 45,044 in November from 43,315 in October, their highest level since December 2009, the British Bankers' Association said.

The pound was up 0.2 percent against the euro at 83.59 pence as of 1217 GMT.

Against the dollar, sterling was up 0.1 percent at $1.6360 , rebounding from its morning losses that followed strong U.S. consumer spending data released on Monday.

British 10-year government bond yields were close to their highest level since mid-September, peaking at 2.994 percent.

The mortgage data followed a string of positive indicators last week that pushed sterling to an intraday peak of $1.6483 on Friday, its highest level in over two years.

"Moving into year-end the pound looks like it's set to outperform alongside the robust recovery in the UK economy, which we think will put pressure on the Bank of England to raise its interest rate by the end of (2014) or early 2015," said Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi.

"It looks like the Bank of England may be the first major central bank to raise rates."

The pound has risen from below $1.50 in July, lifted as the UK economy improved faster than many of its European peers.

But some traders expect sterling's recent gains to be pared back on profit-taking.

"Mid- to longer term sterling has more room to go higher," said Hidetoshi Honda, a senior currency strategist at Mizuho Corporate Bank.

"But what I'm expecting in the new year is a correction."

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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