Mortgages hit as base rate rises to 4.75%

Millions of home owners were facing the prospect of another increase in mortgage bills after the Bank of England raised interest rates for the third time in four months.

The Bank's monetary policy committee raised the base rate by a quarter-point to 4.75 per cent, saying the strength of the economic recovery threatened its inflation target.

Abbey, the high street bank, was the first major lender to move yesterday, increasing its standard variable rate to 6.75 per cent. Others are likely to follow suit in a move that will add £20 a month to the mortgage bill of a typical borrower with a £100,000 interest-only debt.

Business leaders urged the Bank to wait and see before moving again, but some estate agents attacked the rate rise as "totally unnecessary".

In its statement, the Bank acknowledged that Britain's red-hot property market had "started to ease", fuelling hopes that it was close to the end of its tightening policy.