Interest rates rise to 5%

The Bank of England has put up interest rates by 0.25 per cent to 5 per cent.Homeowners were bracing themselves for the increase which had been widely expected.The 0.25 per cent rise is likely to cost homeowners with an average £80,000 mortgage just under £13 a month.If lenders pass on the full hike in rates, monthly repayments on an £80,000 loan will increase from £552.72 to £565.42.The increase comes as banks announce plans to offer 57-year mortgages to youngsters desperate to get on the housing ladder. The new deal is offered by the UK's second biggest mortgage lender, Abbey, while Tesco offers a 52 year deal.The move has been criticised by experts, with Keith Tondeur of debt advice group Credit Action warning: "Lenders are coming up with more ingenious ways to sustain a house price boom that is not sustainable."The rise in interest rates comes despite cooling inflation in September and evidence of a slowdown in High Street spending as sales took a knock last month for the first time since March.Industry leaders have also called for rates to be kept on hold, arguing higher inflation has not led to better wages.But Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, thinks there is little doubt about which way rates will head.He said: "Whilst the last UK interest rate rise in August came as a major surprise to a majority of economists, this time markets will be thrown if rates are not raised by the almost customary quarter percentage point."© Independent Television News Limited 2006. All rights reserved.

ITN | November 9, 2006

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