Britons take on record debt

Prospect of higher rates is failing to deter buyers

Britons borrowed a record £10.7bn last month, increasing the likelihood that the Bank of England will raise interest rates to counter the debt boom.

Official figures showed that the credit surge was driven mainly by mortgage lending.

It is the highest total since the Bank of England began releasing the figures 10 years ago.

And economists say it makes an interest rate rise next month all but inevitable.

Bank of England policymakers hope that raising rates will slow down galloping debt levels and house prices.

HAVE YOUR SAY The cost of housing, council tax, utilities and transport is increasing far too rapidly. Small wonder most of us are struggling to survive and relying on debt. John C, Bath, UK Send us your comments

This would reduce the risk of a sudden crash in consumer spending or house prices later - something that could be highly damaging to the economy as a whole.

Mortgage lending rose by £8.85bn in September. And the value of loans approved also hit a new record of £30.92bn, as the housing market showed signs of picking up again after a summer lull.

'Gone ballistic'

Talk of an imminent rise in interest rates appears to have had little effect on house buyers. The number of mortgages agreed shot up to 136,000 - another record.

John Butler, an economist at HSBC, said mortgage lending had gone "ballistic".

"That seems to cement a rate hike at next week's meeting and indeed will raise fears that rates may need to rise substantially before the consumer cools," he said.

Minutes of the last meeting of the Bank of England's rate-setting committee revealed that four of the nine members had voted for higher interest rates.

Some members expressed fears about record levels of consumer debt.

Interest rates are presently at a 48-year low of 3.5%.

Many economists expect rates will be about one percentage point higher by the end of next year and possibly as high as 5%.