This marks the third monthly increase in mortgage approvals in a row and means approvals were 3% higher than in July last year.
The figures suggest that sales may start to rise gently in the coming months.
Net consumer credit increased by just £205m, less than the £400m increase in June and was the weakest lending growth since January this year. However net mortgage lending increased by £700m.
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: “It’s difficult to get too excited about the pickup in mortgage approvals. Although this might have been a 14-month high, it’s still very low in a historical context and the market remains essentially stagnant. Similarly, lending levels remain just a fraction of long-term averages.
“The housing market is drifting along, with prices and activity levels going nowhere fast. If it were not for the relatively buoyant prime London market, the figures would look even worse. Realistically, we’re not going to see any significant change until there is a decisive improvement in lending conditions and that is unlikely to happen any time soon."
David Brown, commercial director at LSL Property Services, said: “Many new buyers will be taking heart from recent indications that lending is beginning to pick up. According to the Bank of England, approvals have improved for three months in a row and an increasing number of cheaper deals are hitting the market for those who have a big enough deposit.
"It’s far too soon to say that the property market is in recovery, but thanks to the MPC maintaining rock-bottom rates, mortgage affordability is giving would-be buyers an improving chance of making a purchase.
"Nevertheless mortgage lending remains constrained compared to its historic level and it will take a prolonged and sizeable improvement in lending before the number of first-timers able to buy each year returns to anything like pre-downturn levels.
"As a result, demand for rental property will remain strong as the private rented sector continues to mop up demand from frustrated buyers, and we do not expect rent rises to peter out as the year draws to a close.”
Chris Gardner, director at Obligo, added: "Despite the modest increase in the number of mortgage approvals in July, the market is now almost completely stagnant.
"Persistently low interest rates and a steady trickle of enticing deals from lenders are being drowned out by the drumbeat of bad economic news.
"Where once buying a home was seen as a key aspiration for young Britons, many now see it as increasingly out of reach.
"Earlier today the National Housing Federation predicted that levels of home ownership will continue to fall.
"But I feel that the market is now at a critical tipping point. With average rents creeping up by as much as 1% a month, the economics of the housing market are changing.
"We now have a situation where the monthly cost of a mortgage on a typical £125K first time-buyer home is around £100 less than the rental on the same property.
"I predict that over the next six months we'll see whether the current trend towards renting really is a social change - the rise of "Generation Rent" - or just a financial decision.
"When people realise that for many of us it is once again cheaper to buy than rent, the mortgage market should pick up quickly, and the dream of home ownership will be back.
"But if it doesn't, we may have to conclude that there has been a real cultural shift and that the rise of renting is unstoppable."
Richard Sexton, director of e.surv chartered surveyors, said, "July's weak growth figures confirm that the growth we saw in June was just a flash in the pan. The mortgage market is in a state of rigor mortis, and is unlikely to revive until lenders can reach comfort about their core capital.
"Lenders have offered lots of tantalising mortgage products over the summer, but only a fraction of low income buyers have qualified for them. In practice, lenders are targeting low LTV borrowers - less than 10% of approvals in July were for those needing high LTVs, compared to over 20% in July 2007.
"Restrictive rates on high LTV products are locking the majority of first time buyers out of the property market. The autumn will see an even more subdued trend as lenders focus on recouping equity and addressing threats to their balance sheets.”
