Homeowners smacked with interest rate rise

The property market was stunned last night by the Bank of England's decision to raise interest rates for the third time in six months.

Few in the City expected the base rate rise to 5.25 per cent – the highest since the second quarter of 2001 – to come so soon after November's quarter point increase.

However, the Bank's monetary policy committee (MPC), deemed that, at 2.7 per cent, inflation is running dangerously high and needs to be curtailed before it runs out of control.

But this will prove of little solace to homeowners, who face higher mortgage repayments at a time when energy prices are also on the up.

Peter Bolton King, chief executive of the National Association of Estate Agents, criticised the decision, arguing the hike would damage the housing market.

"I strongly urge the MPC to take the regional differences into consideration and not be led by the south-east when making future rate decisions as this approach could be extremely damaging to the market in underperforming areas," he explained.

Homeowners with a mortgage worth £100,000 can expect their monthly repayment to rise by an average of £16.