Growth in mortgage lending picked up last month, the Bank of England said today, beating analyst predictions and suggesting that the waning house-price boom may yet have some way to run.

At the same time fears of an imminent interest rate rise were stoked by figures from the CBI showing that retail sales were unexpectedly strong in March, the fourth straight strong sales volume and that retailers were becoming more optimistic about future sales growth.

After three recent rate rises, mortgage approvals in February were flat on the previous month, at 119,000, modestly above forecasts of 117,000.

This combined, with the CBI figures, seemed to show that three interest rate hikes since August have yet to dampen consumer appetite.

David Brown of Bear Stearns said: “This is the stuff that Bank of England nightmares are made of. “They (the MPC) will want to nip this in the bud very quickly.”

The mortgage approvals figures — regarded as an indicator of future market activity — added to recent data suggesting that the market is set to slow this year, economists said, but at a slower pace than some had expected.

The Bank said today that mortgage lending rose by £10.3 billion last month, up from £9.5 billion in January.

Economists had expected a dip to about £9.4 billion.

Consumer credit rose by £919 million, the smallest rise since September.

George Buckley, the Deutsche Bank economist, said that the stabilisation of mortgage approvals "suggests that the housing market is showing signs of moderating, albeit not especially quickly".

He added: “Strong approvals in the final quarter of last year are still having an impact on the lending figures.”

Nationwide said yesterday that the three rises in interest rates since August have applied a brake to prices, despite reports that supply constraints were continuing to bite.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive