(Updates with fresh mortgage data in last two paragraphs)

Aug 31 (Reuters) - Hong Kong home prices increased by the largest margin in four months in July, climbing 1.9 percent from the month before, government data showed on Wednesday, alongside a mild rebound in the financial hub’s economy in the second quarter.

Home prices increased to 281.4 on a widely tracked government index compiled by the Rating and Valuation Department. The figure, however, was 7.5 percent lower than the same period a year ago, and 8 percent off a historic high hit last September.

Hong Kong property is among the most expensive in the world. The market has cooled off since the September peak, but it has seen modest growth since April. Robust sales in first-hand apartments over the past month have also helped nudge up prices.

Centaline Property Agency Ltd, one of the largest property agencies in the city, said in a statement earlier this month it expected flat prices to return to peak levels in the fourth quarter this year.

Hong Kong’s China-dependent economy grew 1.7 percent in the second quarter from a year earlier even amid a slowdown in exports and tourism.

Property rental prices also edged up 1 percent, the third consecutive monthly increase.

The number of mortgage applications also increased in July by 4.4 percent compared with June, to 10,281 cases, according to data released by the city’s de facto central bank, the Hong Kong Monetary Authority.

The number of mortgage loans approved in July increased 2.7 percent compared with the month before, to HK$22.9 billion ($2.95 billion), while the mortgage delinquency ratio remained unchanged at 0.04 percent. (Editing by James Pomfret and Biju Dwarakanath)