Business leaders in Birmingham have warned of the potential "devastating blow" of any further rise in Bank of England interest rates.
The alarm was sounded after analysts yesterday raised the spectre of an autumn increase when official figures revealed mortgage lending hit a three-year high in July.
That came as a separate study showed retail sales rose swiftly even after this month's interest rise - which in turn also prompted predictions of a further increase.
Approvals for new loans were at their highest since the start of the year, the Bank of England said.
Mortgage lending rose by #9.8 billion - the biggest leap since September 2003 - while the number of new house loans approved reached 120,000, some 1,000 higher than June's revised figure.
The increase is above an analyst's consensus forecast of #9.2 billion and provides further evidence of a strengthening housing market.
The Bank of England said consumer credit rose by #1.1 billion compared with a #833 million rise in June.
And the total value of mortgage approvals, which also includes remortgaging, was #29 billion in July, down slightly on June's figure of #29.4 billion but still above the #28.7 billion average over the past six months.
This month the Bank raised the UK's benchmark interest rate by a quarter point to 4.75 per cent but that has apparently not hit spending yet.
In fact, the high street appears to have recovered from a blip in July according to the CBI, which said retail sales grew at their fastest pace in more than one-and-a-half years in August.
The CBI's distributive trades survey balance jumped to +12 from +7 in July, way above retailers' own expectations of +1 and the highest reading since December 2004, although the survey only covered the first two weeks of the month Birmingham Chamber of Commerce and Industry spokesman John Lamb said the fear was the Bank may again raise the rate in a knee-jerk reaction.
He said: "I think we rather feel all indicators apart from those in business seem to fire the Bank of England into action - anything outside of commerce and industry such as housing and high street spending. The latest rise was bad for business - in particular it was a serious blow to those involved in export and import." Businesses were already battling hard to compete in a marketplace hit by rising fuel and materials costs. Mr Lamb said: "We hope there will be no increase and what we fear is a knee-jerk reaction: that would be a devastating blow for most industries because of the increase in the cost of borrowing and exporting."
David Page at analysts Investec said the Bank of England would be "uncomfortable with the pace of borrowing". He said: "Coupled with strong approvals numbers, which suggest housing market activity will remain strong going into the autumn, plus the hawkishness in the last Inflation Report, these numbers continue to point to interest rates rising again in November."
And Zaki Nada at Thomson IFR Markets believes the case for another UK rate rise was strengthening. "This strong set of data heightens the risks of a near term rate rise which we still expect to materialise in November," he said.
David Stubbs, economist at the Royal Institution of Char-tered Surveyors, said the housing market remained "in excellent health, with a strong economy and investor activity fuelling demand".
He said: "RICS expects UK house prices to rise by around seven per cent this year, however, first-time-buyers will continue to find it hard to access the housing market as house prices rise faster than earnings."