* Sept mortgage approvals show first rise in over a year
* Data revision shows mortgage lending contracted in Aug for first time on record
* Markets convinced further UK interest rate cuts to come
(Adds comment and context)
By Matt Falloon and Christina Fincher
LONDON, Oct 29 (Reuters) - British mortgage approvals rose last month for the first time in over a year, data showed on Wednesday, but analysts cautioned the marginal pick up from August's record low did not portend a housing market recovery.
Mortgage lending last month was more than twice market forecasts, according to Bank of England figures, but that followed a downward revision to August which showed the first net repayment since the series began in 1993.
A global shortage of capital has forced many banks to clamp down on lending over the past year, squeezing the lifeblood out of the property market. House prices are already down 13 percent from their peak and Prime Minister Gordon Brown warned last week that Britain is facing recession.
"September's household borrowing figures provide further evidence that housing activity has found a floor -- but at rock bottom levels," said Vicky Redwood at Capital Economics.
Figures from the Bank of England showed mortgage approvals for house purchase rose to 33,000 last month from a record low of 32,000 in August, the first rise since June 2007.
While the figure was marginally higher than expected, approvals are running at a third of their level a year ago, suggesting further weakness in the housing market -- especially given the recent escalation in the financial crisis.
RATE CUTS EYED
The data did little to alter expectations the Bank of England would continue to cut interest rates after an emergency 50 basis point cut to 4.5 percent this month.
With fears growing over how severe the global economic downturn will be, markets are pricing in British interest rates falling as far as 2.5 percent by this time next year.
"The mortgage approvals data show a market bumping around on the bottom," said David Page, an economist at Investec. "This is certainly nothing like an inflection point and we see this demonstrating an economy that is severely credit constrained."
Net mortgage lending rose by 2.167 billion pounds in September, more than twice analysts' forecasts but still a fifth of what it was last year.
The BoE also revised down its August figure to show a fall of 691 million pounds, indicating lenders had restricted credit to such an extent that British homeowners were paying off more of their existing mortgages than banks were issuing new ones.
Analysts said August's figures were particularly weak due to speculation the government was about to raise the threshold at which stamp duty is paid on property purchases.
On Sept. 2, the government made all home transactions worth 175,000 pounds or less exempt from the duty for one year.
The BoE said consumer credit rose by just 251 million pounds in September, the weakest rise since February 1994 and supporting anecdotal and survey evidence that consumer spending is weakening.
Consumer spending has been a key driver of Britain's economy which contracted in the third quarter after 16 years of unbroken growth.
(Editing by Stephen Nisbet)