The impact of last year’s rise in interest rates is wearing off and consumers have started the year in a confident mood; mortgage approvals are up and retail sales have risen, according to a report from the British Retail Consortium (BRC) published today.

The report comes after stories of gloom on the High Street over Christmas and New Year, and shows that in fact retail sales in January rose at their fastest annual rate for three months.

The BRC found sales measured like-for-like climbed 0.5 per cent on the year last month, their strongest year-on-year performance since October, when they also rose 0.5 per cent.

The research suggests that consumers have lost the timidity which followed last year’s rise in interest rates, when the cost of borrowing increased from 3.5 to 4.75 per cent, and are back in the shops.

Nick Verdi, economist at Barclays Capital, told the Evening Standard: ‘When interest rates started rising, people became quite pessimistic and were worried that they could go up to levels seen in the late Eighties.

‘But that didn’t happen and consumers are realising that, with unemployment low and earnings rising, there is no reason for them to cut back their spending sharply and no reason for the housing market to collapse either.’

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