Interest rates look likely to rise again next week following the release of figures showing Britons had amassed debts of more than £1 trillion.

Consumers have now collectively borrowed £1.004 trillion through mortgages, personal loans, overdrafts, hire purchase agreements and on credit and store cards, according to the Bank of England.

More worryingly, the pace at which people are taking on debt appears to have accelerated, increasing at its fastest rate since September last year, following relatively subdued months in April and May.

Yesterday's figures are likely to concern the bank's monetary policy committee (MPC), which has already expressed disquiet over the unsustainable rate at which consumers are taking on debt.

Data from Nationwide Building Society showed house prices soared by 2.1 per cent during June, pushing annual price growth above the 20 per cent barrier for the first time in more than a year, and quashing hopes the market had begun to slow down.

Economists now widely expect the MPC to raise rates to 4.75 per cent when it meets next week, the fifth increase since November.

Interest rates are expected to peak at between 5.25 per cent and 5.5 per cent next year.

However, City analysts warned the committee could be forced to abandon its gradual approach to rises and increase rates further if consumers failed to reign in their borrowing and the housing market did not slow down.

June's sharp rise in borrowing was driven by a resurgence in unsecured lending, such as through credit cards and personal loans, with a record £18.44 billion lent during the month.

Friday July 30, 2004