Homeowners faced rises in the cost of their mortgages today after the Bank of England lifted interest rates to four per cent.

The Bank's nine-member Monetary Policy Committee (MPC) raised the base rate by a quarter point to keep inflation on target and curb house prices and consumer spending.

Nationwide Building Society, Abbey, Barclays, the Woolwich, Sainsbury's Bank and First Direct all increased their mortgage rates by 0.25 per cent following the Bank's announcement while others said they were reviewing the situation.

Homeowners whose lenders pass on the rise will see monthly repayments on a £65,000 mortgage increase to £418.79 from £408.91, based on a new six per cent rate.

The Bank's move represented the first hike in the official cost of borrowing since November, when rates rose for the first time in almost four years.

The MPC said it believed the increase was necessary to keep inflation moving towards the Government's medium-term two per cent target.

It added that surveys had pointed to a further pick-up in the first quarter of 2004, household spending and borrowing was resilient and the housing market remained strong.

Economists said they expected further increases this year, although opinions differed on extent and timing.

Philip Shaw, of Investec, said rates would probably rise in May and he predicted they would rise to 4.75 per cent by the end of the year.

Friday February 06, 2004