Homeowners are bracing themselves for another rise in interest rates today.

The Bank of England may increase them for a second consecutive month, to 4.5 per cent, to cool house price growth and consumer borrowing.

But some economists predict it will wait until next month amid fears a rate rise could snuff out any recovery in the manufacturing sector.

Data released by mortgage lenders since the meeting of the bank's monetary policy committee (MPC) at the beginning of last month has suggested no slow-down in the housing market.

The pound recovered much of its strength against the US dollar last month, which has put UK exporters under renewed pressure.

HSBC economist John Butler said the decision was a tough call and there seemed little reason to delay raising rates.

He added: "On balance, we still believe the MPC will want to see the impact of May's rate decision on the economy and the consumer in particular."

This view was reflected by David Buik, of financial bookmakers Cantor Index, who rated the likelihood of an interest hike at 40 per cent.

But supporters of a rise in the cost of borrowing include Investec economist David Page, who noted the more hawkish stance of the MPC towards inflation at its previous meeting. Minutes from the meeting revealed the MPC considered lifting rates by half a percentage point.

Mr Page said: "The MPC is increasingly concerned consumer spending, household borrowing and house prices have refused to respond to the interest rate medicine administered so far."

The decision by oil cartel Opec to raise production quotas will help bring fuel prices down and ease inflationary pressures but not by enough to delay a rate increase.

Buoyant High Street spending, a resurgent housing market and the appetite among consumers for debt meant immediate action was necessary, said Simon Rubinsohn, chief economist at Gerrard.

Thursday June 10, 2004