Credit and mortgage debts rocket

Fears of rising interest rates and an early Nineties-style housing crisis were heightened today by news that consumers went on another huge borrowing binge last month.

They piled on £7.35billion of extra debt in March - a 37 per cent increase on a year ago, according to figures from the British Bankers' Association. Mortgage lending accounted for nearly £6billion of the increase, while spending on credit cards rose by £484 million. Both increases were substantially higher than in recent months.

Liberal Democrat shadow chancellor Vince Cable said: "This rise in lending by banks and building societies is recklessly fuelling the housing boom.

"Large numbers of people are gambling on the house price boom - a gamble they may regret if house prices start to fall or interest rates rise." Economists said the figures increased the likelihood the Bank of England would lift rates by a quarter-point to 4.25 per cent at its next meeting in May.

Britain's total debt mountain is fast approaching £1 trillion as consumers take advantage of low interest rates.

"March saw a large rise in mortgage lending," said the BBA's director of statistics David Dooks. "Individuals' appetite for borrowing shows little sign of abating." The borrowingblowout came despite two interest rate rises, in November and February, delivered by the Bank of England which took the base rate to four per cent.

Separate figures showed the public finances plunged further into the red last year than at any time for the past nine years. Net borrowing in the 2003-4 financial year totalled £34.8 billion, the highest since 1994-5.