Record mortgages and borrowing binge increase bank rate pressure

An unprecedented 232,000 mortgages with a total value of £14.8bn were agreed by Britain's leading banks last month, it was revealed yesterday.

At the same time, spending on credit cards was only slightly below December's all-time high, with shoppers spurred on by the Easter break, the continuing feel-good factor and April's sunny weather.

The detailed lending figures issued by the British Bankers' Association are likely to increase speculation that the Bank of England's monetary policy committee will have to raise interest rates in the next few months to bring the borrowing binge to an end.

The BBA, whose member banks account for the majority of all home loans, said April saw a record £4.2bn rise in net mortgage lending, to £393.7bn. The 232,800 home loans approved with a total value of £14.8bn are 31% by number and 45% by value higher than a year earlier.

Simon Pitkeathley, the BBA's executive director, said the new figures highlight the strength of the mortgage market. "While interest rates remain at current levels and lenders compete for market share, borrowers are quick to see the potential for cheaper, affordable loans," he said. "As a consequence, house purchase loans are on average 14% higher than a year ago."

Spending on credit cards totalled £6.383bn, only slightly lower than the record £6.396bn figure rung up in December 2001.

"Easter spending no doubt contributed to this strength, but the total was 17% higher than in April last year," said the BBA.

The flipside of the BBA's bullish assessment was a new study by housing charity Shelter showing that more than one in five people have struggled to pay their mortgage or rent because of financial insecurity and the high cost of housing in many areas.

The report out today says that of those who pay for their housing, 43% have worried about or been unable to pay their mortgage or rent - representing almost 11m people. The Mori survey carried out for the charity estimates that about half a million people were unable to pay last month's mortgage or rent, which in England averages £403 a month. 28% of those who pay for their housing have no savings to fall back on to cover their housing costs, making them particularly vulnerable. "Any sudden change in circumstances such as unemployment, ill-health or higher housing costs would immediately put homes at risk," said a spokesman.

The report was published to coincide with the launch of Shelternet, a free online advice service it has set up in partnership with the Halifax, to provide help to people facing a housing problem.