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In a widely expected move, the Bank of England has increased interest rates by 0.25% to 5.75%, meaning greater costs for homeowners but good news for savers.

The Bank is now tipped to raise rates to 6% by the end of the year or possibly even earlier.

Inflation and house prices are the main reason rates are on the up, with both being a cause for concern to the Bank's decision makers.

Inflation has been above the target figure of 2% for some months, and while it dropped in June to 2.5%, it is the Bank's main role to bring it down further.

House prices are still increasing in most parts of the country, and in London boom conditions remain, preventing first-time buyers from getting on the ladder and allowing consumers to borrow still more against the value of their homes.

Increased mortgage costs

The rise puts around £31 on the monthly interest payments for a £150,000 mortgage.

For those with larger loans, it will add an extra £42 on a £200,000 mortgage and £62 a month on a £300,000 loan.

Property market experts worried

Commenting on the rise, Ray Boulger, chief economist at mortgage adviser John Charcol, said "(There will) be a considerable negative impact on the housing market over the next couple of years, as the 40% of borrowers, i.e. 4.5m households, with a 2 year fixed rate progressively have to refinance at higher rates."

He advises borrowers that "with the market having fully factored in not only this rise, but also another one to 6%... most fixed rates look expensive compared to discounts and trackers, unless Bank Rate goes beyond 6%."

"Currently, the best two year tracker mortgages are around 0.35% cheaper than the best 2 year fixed rates, even after the effect of today's rise. Thus a fixed rate mortgage will only be cheaper if Bank Rate rises rapidly to at least 6.25% and stays there, or goes higher, for some time."