THE breakneck pace of personal borrowing continued unchecked last month as mortgage lending rose at its fastest pace in a decade, reigniting the threat of an increase in interest rates next week.

In further signs that the twin high street and housing booms show little sign of any let-up, Bank of England figures showed that total personal borrowing climbed by £10.7 billion in February — the largest increase since October.

Mortgage lending rose by a hefty £8.98 billion, leaving growth in secured lending rising at an annual rate of 14.5 per cent — the fastest since present records began in 1994.

City economists remain split over whether interest rates will rise from 4 per cent next week or in May.

But with the verdict of the Bank’s Monetary Policy Committee in the balance, analysts agreed that the strength of the lending data could tip the balance, particularly if other data before the MPC’s meeting is also buoyant.

Yesterday’s figures also showed that unsecured lending, through credit cards and personal loans, continued to climb rapidly, rising by £1.7 billion last month, although this was down from a £2 billion increase in January.

The figures will deepen the Bank’s dilemma over a further rate rise that could propel sterling yet higher, jeopardising hopes of rebalancing the two-speed economy.

With growing expectations that the European Central Bank will cut eurozone rates, an increase in UK rates would risk giving the pound extra upward momentum.

Pressure for the ECB to cut rates intensified again as the European Commission sounded a warning that sluggish consumer spending on the Continent was putting recovery at risk.

But despite UK industry’s worries over sterling, there was better news on its performance as manufacturing productivity rose at an annual rate of 6.3 per cent in the final quarter of last year, its best showing for four years.