There are concerns that housing is becoming increasingly expensive

Housing charity Shelter Scotland said the increase to 5.75% would leave some homeowners close to their financial limit and struggling to pay bills.

A spokesman for the Scottish Chambers of Commerce said that the rise was "worrying" in terms of the possible effects on wage settlements.

The Bank of England intends the rise will help reduce inflation.

With people already overstretching themselves just to get on the housing ladder, this rate rise will push many to their financial limit, leaving them facing mortgage arrears, repossession and even homelessness Archie Stoddart Shelter Scotland

Shelter Scotland estimated that at approximately �100 a month worse off than last year, many Scots could face mortgage arrears, repossession or even homelessness.

The charity based its calculation of an extra �100 a month on average wages and average house prices.

With an average wage of �21,419, and an average Scottish house price of �143,045, a mortgage payer would have had �334 a month to live on in 2006 after paying other basic household costs like council tax and water charges, the charity said.

The interest rate increase to 5.75% would leave the average homeowner with �225 - �109 less than in 2006, according to Shelter.

'Perhaps inevitable'

The director of Shelter Scotland, Archie Stoddart, said: "With people already overstretching themselves just to get on the housing ladder, this rate rise will push many to their financial limit, leaving them facing mortgage arrears, repossession and even homelessness.

"For many though, house prices are simply out of their reach.

"Housing is becoming increasingly unaffordable for ordinary families."

He added: "We must see a commitment from our recently elected politicians to find ways to give people real choices about how and where they live.

Housing is central to our nation's health, wellbeing and economic future."

Garry Clark, policy manager at the Scottish Chambers of Commerce, said the rise was "perhaps inevitable"

He added: "We simply cannot afford to put recent encouraging growth levels at risk, and by using interest rates alone as the tool to rather down inflation, we now have rates consistently above our Eurozone, Japanese and US competitors, placing further upward pressure on exchange rates and potentially damaging our export sales."

'Long pause'

Business organisation CBI Scotland's director Iain McMillan, said that the rise announced by the Bank of England had been widely expected.

He said "This is the fifth rate rise in a year and there are growing signs that the medicine is starting to work.

"Wage growth has stayed subdued, the housing market appears to be slowing, and high street sales growth is weakening."

He said a slower economy would make it unlikely that the recent ability of companies to push up prices would continue.