The 22-year-old made nine assists in an impressive half season at Cardiff before returning to Wolves in January.
The left-wing-back – who has also played as a forward – impressed Lage in training and almost stayed with Wolves, before making a late deadline day loan switch to Blackburn.
And Lage admits he did not expect Giles to have developed so quickly and he is now looking for the youngster to stake a claim for Wolves next season.
Lage said: “It was very good for him to work with us and to go to Cardiff to play as a left-wing-back – he did very well.
“He came back and worked with us during an international break and it was good.
“It was a big surprise that he grew up a lot but in the end I needed to take the decision with him. I talked with him and we took the decision with Scott (Sellars) for him to continue on-loan.
“We have Rayan, Marcal and Jonny so we have a lot of options to play as a left-back. Giles deserved to continue to play.
“I believe a lot in him because I’ve seen the way he has grown up in the last month. Now it depends on him and he knows, but he has all the quality and potential to belong to our squad.”
Giles will have some competition, however, with 20-year-old Rayan Ait-Nouri impressing this season.
But Lage believes the pair are on a level playing field.
Lage added: “To be fair, I think he (Giles) is the same level (as Rayan).
“He has little things he needs to improve, as does Rayan. He did a good improvement in the last month, especially in the defensive way because we know what he can do in the offensive way.
“And with Giles there is not a big distance between them.
“It was a hard decision because if we don’t have Jonny or Marcal then I was happy with him, but with these solutions here I prefer him to continue to play and that’s why the decision was in the last hours of the day.
“I needed to take the best decision for the club and the player and for the club what is best now is for the player to grow up.”
Bruno Jordao also left on-loan on deadline day and made a switch to Grasshoppers.
He made his debut off the bench on Saturday and despite the lack of depth in midfield, Lage was keen for him to go and get minutes following his injury lay-off.
He said: “Jordao came from a long injury and with the midfielders we have he deserves to play.
“Here it was very hard to play and to give him some minutes, so in the end I think it is better to play and have some minutes because we need to see him in action.”
Meanwhile, Joao Moutinho has been nominated for the The PFA Vertu Motors Fans’ Player of the Month award for January.
The midfielder notched two important goals as Wolves had a perfect month with four wins from four.
Moutinho is up against, Trent Alexander-Arnold, Jarrod Bowen, Kevin de Bruyne, Jack Harrison and James Ward-Prowse on a six-man shortlist.