Debt mountain higher than ever

EXPECTATIONS that the Bank of England will pull the interest-rate trigger next week were reinforced today by news that consumers piled on a record amount of debt in September.

Lending rose by £10.7bn - the biggest one-month increase since records began in 1993. That took the total consumer debt mountain to £906bn.

The increase was fuelled by a £8.8bn surge in mortgage lending - also the biggest one-month rise on record.

Consumer credit, which includes borrowing on credit and store cards, loans and overdrafts, rose by £1.8bn against £1.6bn the previous month.

Experts said the figures indicated that consumers' appetite for debt is not waning despite talk of an imminent increase in the cost of borrowing.

John Butler, economist at HSBC, said: '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.'

However, Stephen Nickell, who is a member of the Bank's monetary policy committee, said yesterday that rates should be really raised 'one step at a time' in order to avoid a sudden collapse in confidence.