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.”
Interest rates rise to 5 per cent