THE cost of buying a home is to rise again after another hike in interest rates - and there could be more pain to come.

The Bank of England's Monetary Policy Committee today increased the base rate by a quarter of one per cent to 5.5 per cent, its highest level for six years.

The news for homebuyers was grim but savers welcomed the prospect of higher interest. A quarter per cent rise will add around £20 a month to an interest-only mortgage of £100,000.

Chatham-based Kent Reliance Building Society chief executive Mike Lazenby said the rise was expected. However, he thought it should have gone up by half of one per cent because that would have stopped speculation about a further rise.

He said: "I'd guess there will be another rise in three months. I don't see them going any higher, especially with rates in Europe being lower."

Kent Reliance withdrew its fixed rate mortgages - apart from its 25-year product - last month when an interest rate rise was triggered by inflation up by 3.1 per cent. It triggered the first-ever letter of explanation to Chancellor Gordon Brown from Mervyn King, Governor of the Bank of England.

Mr Lazenby said new fixed-rate products would be announced soon, however, he warned that uncertainty over another rate rise meant they might be short-lived. "It would have been more predictable if they had moved base rate the full half point per cent."

He warned of a "rate shock" for borrowers with mortgages on two or three year fixed rates when they were switched to a variable rate. The society's 25-year fixed rate product at 5.5 per cent was still available, he said, but it might be withdrawn soon.