The effects of higher borrowing costs are beginning to take their toll on lending, according to the latest data on the mortgage market.

Figures released today by the British Bankers’ Association (BBA) reveal that the number of mortgage approvals fell by 14 per cent last month and analysts expect this weakening to continue throughout the year.

Interest rates have gone up by one percentage point since last August but consumers have been more resilient than many economists had expected. The housing market remains buoyant, with prices having risen by 10.9 per cent over the last year, according to Halifax. High street spending has also been strong.

However, over recent weeks evidence has emerged suggesting that higher interest rates are beginning to bite. The BBA figures, which revealed that 170,000 mortgages were approved in April, down from 198,000 in March, follow a survey from the Royal Institute for Chartered Surveyors, which found that new buyer enquiries have fallen for the fifth consecutive month. This will filter through to the housing market over the coming months, with many property analysts predicting that the rate of growth will fall to around 5 per cent by the end of the year. But if interest rates rise again, the impact on the property market could be more severe.

At the beginning of May, the majority of economists had thought this month’s rate increase, which took Bank rate from 5.25 per cent to 5.5 percent, would be the last in the current tightening cycle. However, the Bank of England has since published its quarterly inflation report, within which it hinted that rates may have to rise again to curb inflation.

The consensus view is now that Bank rate will go up to 5.75 per cent before September, with a 50:50 chance of a further quarter point increase before the end of the year. This would take Bank rate to 6 per cent, its highest level for seven years and economists warn that it could trigger a fall in house price in some areas.

Fionnuala Earley, chief economist at Nationwide building society, said: “In our view, the talk of rates climbing to 6 per cent are overblown and if implemented in the current climate, could be damaging to housing market stability. With the market already showing signs of cooling, too sharp a rate hike could undermine market confidence and dry demand up swiftly. On top of this it could also lead to widespread payment difficulties, which could precipitate price falls.”