FEARS that heavy debt burdens have heightened households’ sensitivity to rising interest rates were fuelled yesterday after a surprising tumble in consumer confidence in the wake of this month’s increase in borrowing costs.

In a fall blamed on the quarter-point rate rise — the first for nearly four years — sentiment among consumers slumped to its lowest level since the Iraq war in March.

The headline reading in the key barometer of confidence from GfK Martin Hamblin dropped to minus 6 in November from October’s minus 3, confounding most analysts’ expectations of a rise.

The driving force behind the outbreak of pessimism was a deterioration in the survey’s measure of households’ confidence over the economic outlook. Its measure of this slid to minus 18, from minus 13.

Although they remained relatively positive over their personal finances, consumers also became much more gloomy over whether now is a good time to make a major purchase, with the gauge of their views on this falling to plus 6 from plus 18.

Economists’ surprise at the disappointing numbers was increased as the slide in sentiment coincided with other data showing mortgage borrowing setting another record. Net mortgage lending by leading banks rose to a new high of £5.9 billion in October, the British Bankers’ Association said.

The drop in confidence will add to the Bank of England’s anxiety over the impact of any further rate rises. It is expected to tread warily and hold rates next week. Retailers will also worry that the fall in sentiment will hit Christmas sales.