Mortgage borrowing grew at its fastest pace on record last month, according to figures from the Bank of England yesterday that indicate households shrugged off the impact of the recent rises in interest rates.
Homeowners borrowed almost £9bn in February, £500m higher than January's increase and 14.5 per cent up on a year ago, the strongest annual rise since the Bank started collecting figures in 1994.
The pound and gilt yields rose as analysts said the figures pointed to further rate rises, possibly as soon as next week.
Stephen Nickell, a member of the Bank's rate-setting Monetary Policy Committee, said mortgage lending was set to carry on rising "rapidly" but insisted that was "perfectly natural".
He denied there was a price "bubble" in the housing market, saying it was driven by a shortage of properties. Annual house price growth has accelerated from 14 to 18 per cent in the past four months.
"We must expect mortgage debt to continue rising quite rapidly because house prices are higher and this [means] new mortgages are bound to be bigger than old mortgages," he told the BBC.
"Of course we take great account of house prices because house prices feed into demand in the economy and that feeds into inflation. By and large, people with mortgages are able to repay them and are able to cope with the interest payments."
His comments and the mortgage figures will add to recent speculation in the financial markets over how the MPC will deal with the state of the housing market.
Last week Mervyn King, the Governor of the Bank, said the MPC had no plans for surprise rate rises to "jolt" consumers. He was echoed by fellow committee members Kate Barker, Rachel Lomax and Marian Bell. Instead Mr King warned about the impact of the recent rise in the pound on exporters, which analysts said made an imminent rise less likely.
However Sir Andrew Large, one of the deputy governors, said he was "conscious" of the debt situation when setting rates. John Butler, the UK economist at HSBC, said: "The debate is raging over whether the MPC will hike in April or May."
Mr Butler said the strength of the housing market was highlighted by Bank figures showing 118,000 mortgages were approved in February, less than the 120,000 seen in January but well above the sub-100,000 levels seen in the first half of last year.
Simon Rubinsohn, the chief economist at Gerrard, said: "The latest borrowing figures will do nothing to reassure the MPC that households are taking any notice of its warnings over the dangers of accumulating too much debt.
"Nor do they appear to have been influenced by the tightening in policy seen to date. This strengthens our conviction that a further hike in rates is likely as early as next week's meeting."
Economists are now anxiously awaiting today's March house price report from Nationwide building society and tomorrow's high street sales survey by the CBI.