The Bank of England is this week expected to leave interest rates unchanged despite further increases in house prices.

Members of the monetary policy committee are expected to act cautiously following last month's quarter point rise in rates.

Whilst the committee is poised for further rate rises, it is thought they will hold off to assess the impact of last month's decision.

But the early evidence suggests that house prices are still climbing despite the first increase in interest rates for over three years.

Minutes released following the last meeting revealed that the decision to increase rates had been taken my a margin of nine to one.

"If rates were not raised, household borrowing would be more likely to continue to grow at a rate would eventually prove unsustainable, and there would be greater risk of a sharp downward adjustment to house prices if they became more overvalued, complicating the operation of monetary policy," the committee said.

But the Bank of England also stressed the need to move slowly in order to minimise the effects on debt laden consumers - a signal that rates are likely to remain unchanged until early next year.

"The committee also noted that, because of higher household debt burdens, there was increased uncertainty as to the strength of the response of the consumption to any given interest rate change," said the minutes.

"It would therefore be appropriate to move interest rates cautiously."

City analysts expect rates to rise incrementally over the next two years - peaking at around five per cent by 2005.