London Briefing:As interest rates rose last week to their highest levels in 6½ years, signs of a slowdown in the UK economy are coming thick and fast.

The UK's biggest retailer, Tesco, has already reported tougher trading, particularly in its non-food business, and there have been warnings of falling consumer demand from budget airline Ryanair and from Britain's biggest car dealer, Pendragon.

On Monday it was the turn of the housebuilding sector, as Bovis Homes spooked the market with news of a fall-off in inquiries and reservations in recent weeks, a warning which slashed its shares by more than 10 per cent and sparked widespread falls among its rivals.

Yesterday Marks & Spencer became the latest company to warn of a slowdown, with chief executive Stuart Rose reporting a significant decline in sales growth in recent weeks.

At 2 per cent, underlying sales growth at the group over the last quarter was the weakest in almost two years, hit by the combination of rising interest rates, consumer uncertainty and the extreme weather conditions.

The M&S chief executive said he expects short-term trading conditions to remain challenging - and if trading is tough for M&S, which is widely accepted to have got its act together over the past couple of years, then it is likely to be far tougher for many of its competitors, analysts believe.

Although the latest monthly snapshot of the high street from the British Retail Consortium, also released yesterday, showed sales growth was strong in June, the BRC says retailers have been slashing prices to woo consumers, which will take its toll on margins throughout the sector.

And consumers appear to have been bringing forward purchases of some larger items, such as fridges and furniture, in an attempt to beat future interest rate rises. This in turn does not augur well for the sector's sales figures as the year goes on.

Last week's quarter point rise in interest rates, to 5.75 per cent, was the fifth hike since last summer. Many economists believe rates will hit 6 per cent by the end of the year and a significant number say they could climb to 6.25 per cent within the next 12 months.

Leaving aside the difficulty that creates for would-be home-owners, who are now finding it virtually impossible to get on the housing ladder, the toll this will take on those who have managed to clamber a few rungs up will be severe.

Recent figures from the Woolwich building society revealed that first-time buyers are already paying close to a third of their income in mortgage charges - and this spirals to an unsustainable 50 per cent in some parts of London.

Many mortgage borrowers have been protected from the rate rises of the past 12 months by the fixed-rate mortgages they took out two or three years ago.

But as those fixed-term loans start to unwind from the autumn, those borrowers will find themselves jolted back into the real world.

Higher incomes might have provided a cushion but disposable income in Britain has recently reached a five-year low. Neither is dipping into savings an option for many - the country's savings ratio (the proportion of incomes that people tuck away) has also plummeted to its lowest level in almost half a century.

As many as two million borrowers are estimated to be coming to the end of their fixed-rate deals over the next 18 months.

Many will find to their cost that loans which were just about affordable at 4.5 per cent two years ago will prove impossible to manage at 6.5 per cent.

No wonder the retailers are worried.

Chips not down

Rising food prices will put a further strain on household spending in the months ahead.

Many of Britain's crops have been hit by flooding after the torrential rains that made last month the wettest June since records began in 1914.

Crops of peas, wheat and barley have been rotting in the fields and in many areas farmers are unable to plant new crops because the ground remains waterlogged.

The impact is already being seen at the local chippie, with fish and chip prices rising because of a shortage of potatoes and mushy peas. Farmers reckon less than 20 per cent of the pea crop has been harvested to date, instead of the 50 per cent that would have been expected by this time of the year.

Food prices were already on the way up because of higher oil and raw material costs. Overall, food prices in the UK rose by 4.9 per cent in the year to May, although the increase for vegetables was almost 10 per cent and for fish the rise was 12.7 per cent, way above the government's 2 per cent inflation target.

Now the worry is that these latest increases will further fuel inflation, putting additional pressure on the Bank of England to raise rates in an effort to get the figures back within target. And that can only mean more bad news for Britain's mortgage borrowers.

Fiona Walsh writes for the Guardian newspaper in London