Higher interest rates are cooling the housing market and deterring consumers from taking on extra credit card debt…

Data from the British Bankers' Association indicated that the number of mortgages approved in March was down 8% on the same month in 2006, even though increasing house prices meant the total value of the loans rose by 5%, reports The Guardian.

When remortgages are stripped out, the figures showed an even steeper year-on-year drop of 12.3% in approvals for new house purchases. The BBA said credit card borrowing fell by £100m in March as consumers continued the trend of the past 15 months and decided to pay off some of their outstanding balances.

David Dooks, the BBA's director of statistics, said:

"Strong levels of gross mortgage lending reflect homebuyers and homeowners seeking out fixed-rate mortgages as protection against rising interest rates. However, in the last two months net lending has risen less sharply and, compared with the same time last year, the number of mortgages approved in March was lower, indicating that weaker demand is starting to emerge."

MPC rise ‘guaranteed’ next week

Despite the evidence that the three increases in interest rates since last August are starting to bite, the City believes that a fourth quarter-point rise from the Bank of England's monetary policy committee is guaranteed next week.

The monthly GFK report on consumer confidence carried out for the European commission was published yesterday. It ran counter to the BBA data, indicating that Britons were becoming less gloomy about both their own financial situation and the outlook for the economy.

Some City analysts believe that the Bank will pause after pushing up rates to 5.5%, but others are forecasting action to curb inflation later this year.