Rising interest rates had inclined economists to expect that borrowing would decline but this has clearly not been the case in the 1st quarter of 2006.

The big surprise to me is that households are still leveraging up,” said Bob Mellman, an economist at J.P. Morgan Chase & Co. “I had thought that higher interest rates, fewer home sales and less house-price appreciation might convince households to curtail borrowing. But borrowing is as strong as ever.”

In fact, it’s slightly up.  Household debt grew by 11.6% in the 1st quarter of 2006, up from 11.1% in the 4th quarter of 2005.