LONDON (Reuters) - Net lending to British households unexpectedly fell to a four-month low last month after a sharp decline in mortgage lending, reinforcing economists' concerns that tight credit conditions may hamper future growth.

While there was a small rise in the number of mortgages approved and a separate survey showed an unexpected rise in consumer confidence, analysts said it was not enough to stop continued housing market weakness, with knock-on effects for consumer spending.

"Housing is going nowhere fast, and when disposable incomes are going to be under pressure, it is not going to help the consumer do anything apart from pedestrian spending growth," said BNP Paribas economist Alan Clarke. The Bank of England reported that net mortgage lending fell to £86 million ($132.5 million) in July from £518 million in June — a four-month low and a sharp contrast to the rise to £700 million that economists had expected.

The fall in net mortgage lending was split roughly equally between a decline in new lending and an increase in repayments by existing borrowers.

Record-low Bank of England interest rates make it cheap for many existing mortgage-holders to pay more than the contractual minimum on their home loans, while banks impose tougher conditions on new borrowers than before the credit crunch.

There was a small, unexpected, increase in the number of mortgages approved, a leading indicator for housing market activity. But it remains less than half boom-time levels and nearly 20 percent below a 21-month peak reached in November.

Some 48,722 home purchase mortgages were approved in July — better than last week's industry figures had suggested and up on June's 48,562 but well below the 59,117 recorded in November.

House prices fell by around a fifth between late 2007 and early 2009, and have since recovered by around 10 percent, before flattening with growing evidence of renewed falls.

Many economists are worried that Britain's economy may slow sharply next year, due to weakening growth in export markets and looming cuts of around a quarter to the budgets of most government departments.

A relative bright spot was unsecured lending to consumers, which rose by £173 million last month versus economists' forecasts for it to remain little changed on the month.