Britain's borrowers may force interest rates higher

mortgage lending increased by its highest amount for four months, while people also borrowed a record £18.03bn through credit cards, overdrafts and loans, according to the Bank of England.

The rise in borrowing came despite interest rates rising by 0.25 per cent at the beginning of February, following a quarter-point increase in November.

Mortgage lending totalled £25bn during the month, and after redemptions and repayments were taken into account, outstanding mortgage debt rose by £8.98bn, the highest rise since October last year.

Philip Shaw, an economist at Investec, said: "The figures demonstrate the amazing buoyancy of mortgage demand.

"Although we have seen two interest rate increases since the autumn, households remain relatively impervious to higher borrowing costs. It proves that four per cent is still a low base rate."

Mortgages worth £26bn were approved during February, above the £25.79bn approved in January, but below the recent average.

About 118,000 loans were approved for house purchase, compared with an average of 122,000 in the three months to the end of January.

During last month, Britons borrowed a record £11.68bn on credit cards, and £6.34bn through loans and overdrafts.

After repayments were taken into account, unsecured lending increased by £1.73bn.

While this was down on January's figure of £2.01bn, it was the second highest monthly increase recorded since May last year.

Within this figure, credit card lending rose by £512m, compared with a rise of £741m the previous month, to give Britons a total outstanding debt on plastic of £53.11bn.

Simon Rubinsohn, chief economist at stockbroker Gerrard, said: "The borrowing figures will do nothing to reassure the monetary policy committee that households are taking any notice of its warnings over the dangers of accumulating too much debt.

"Nor do they appear to have been influenced by the tightening in policy seen to date."