RISING interest rates have yet to put a dent in high street spending but may have begun to cool the housing market, a set of reports indicated yesterday.

The CBI said that despite mild weather this month and higher interest rates, retail sales for September remained solid, rising at their strongest pace since December 2004. In its survey, 14 per cent more retailers reported sales up on a year ago than said sales had fallen, up from a positive balance of 12 per cent in August. Confidence over expected sales was the highest in two years, the business group added.

Flatscreen televisions — the summer spending craze previously attributed to the effect of the World Cup — continued to be sold briskly at the start of autumn, the report found. Sales in furniture and carpets, as well as clothing, were also strong.

John Longworth, executive director of Asda and chairman of the CBI’s panel on retail sales, said: “On the basis of recent performance, retailers are optimistic for October’s sales. We now wait to see how the Bank of England’s autumn rate decisions affect confidence as we enter the busier pre-Christmas period.”

Figures issued yesterday in National Accounts showed that the ratio of household savings declined in the year’s second quarter to 5.2 per cent, from 6.4 per cent, matching an increase in spending on consumer goods.

Vicky Redwood, of Capital Economics, described the dip in savings as “hardly the most sustainable basis for a spending recovery”. She said that retail sales eventually would respond to the rise in interest rates last month and higher utility bills.

Borrowing statistics out yesterday carried clues that the prospect of rates rising again to 5 per cent in November may be starting to hold down growth in house prices.

The British Bankers’ Association (BBA) reported that new mortgage approvals for house purchase rose to 71,300 in August, above the figure for July but well below the figure of 86,100 recorded in June and up by only 3 per cent over the year. Approval figures are often seen as a leading indicator for the housing market’s health.

The cash total of all gross mortgage advances in August month hit a record £20.9 billion, the BBA said, but the value of new approvals was a relatively low £19.1 billion.

Howard Archer, of Global Insight, said: “Even allowing for seasonal factors, [the approvals data] hints that August’s interest-rate hike and the possibility of more interest rises to come could be starting to have some dampening impact on housing market activity.”

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