HOMEOWNERS and borrowers were dealt a further blow yesterday when the interest rate went up to 5.75 per cent.
The 0.25 per cent rise will add £16 a month on an average £100,000 repayment mortgage.
It is the fifth rate rise from The Bank of England in the last 12 months and it brought a warning from the Citizens' Advice Bureau that it could spell "disaster" for families already struggling to keep financially afloat.
The charity's network of bureaux has already witnessed a surge in people seeking help over mortgage arrears in recent months.
Higher interest rates come at a time when many households are already suffering the effect of rises in both council tax and household bills.
Peter Tutton, social policy officer at the Citizens' Advice Bureau, said the additional cost of a further rate rise would hit homeowners hard.
He said: "Current research shows there are more people going into local bureaux who are falling behind with mortgage payments and in some cases are threatened with repossession, and we know some people are taking on mortgages that stretch them to the absolute limit.
"A rise in mortgage interest rates could spell disaster for people whose finances are balanced on the very edge of affordability."
Sue Edwards, spokesman for the Citizens Advice Bureau in Bolton, said: "We are seeing more and more people coming in for help with mortgage or secured loan arrears.
"People are really stretching themselves to the limit to buy a house and take on a mortgage, so a small increase in interest rates could just tip them over the edge."
Repayments on a £100,000 mortgage have shot up by £80 per month since last summer.
Yesterday's rate rise was widely expected as inflationary pressures have remained strong and borrowers came within a whisker of a hike last month.
The Bank said in a statement that it remained concerned about hitting its two per cent target for inflation.
It is charged with keeping Consumer Prices Index (CPI) inflation at 2 per cent, but the measure has been running above target for more than a year - reaching a peak of 3.1 per cent in March.
Falling gas and electricity prices have reduced the figure to 2.5 per cent since then.
Simon Brooke, the business development manager of Egerton-based debt specialists Ideal Debt Solutions, said the picture was still gloomy.
"There is no doubt that the cumulative effects of interest rate rises are beginning to bite with some borrowers, particularly with loans and credit cards."
There are fears that 2007 could be the worst year ever for personal insolvencies, beating last year's record figure of 107,288.
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