ONE of York's largest employers has warned that yesterday's 0.25 per cent interest rate rise to 4.75 per cent will intensify what is already the biggest headache for householders.

In its third quarterly debt report, CPP, which employs more than 1,000 people at its headquarters in Holgate Road, York, cites paying the mortgage as one of the biggest worries that faces more than a third of Britons.

Yesterday's rise, which will add about £40 to an average monthly mortgage repayment, is "set to increase those concerns," states the company.

It has interviewed 2,000 people, with the results showing that 34 per cent of the nation are worried most about mortgage repayments, with other key concerns like council tax demands (20 per cent) and utility bills (16 per cent) trailing in its wake.

CPP, which provides consumer assistance services like protection against credit card theft, reports that the number of people worried about mortgage repayments was up three per cent from 31 per cent in June to 33 per cent in July and with yesterday's rise was likely to increase further.

Shirley Woolham, from CPP's financial health, said that the new interest rate rise follows reports that house price increases at 1.2 per cent had dropped from 2.6 per cent in June - "evidence that the recent base rate increases are having the desired effect of cooling the housing market.

"These figures further bring into the question the long-term sustainability of current house prices as demonstrated by the fact that people are most concerned about meeting their mortgage repayments."

But Kevin Hollinrake, director of York-based Hunters Estate Agents, has described the increase as "relatively modest". He appreciated that increases were needed over the past few months to stabilise the property market which was "in danger of completely overheating."

"However we believe that the market has already cooled substantially and the Monetary Policy Committee could be over-reacting."

He said that speculation by Bank of England governor Mervyn King on potential falling prices was having "an additional and much more dramatic effect than the rate rises themselves"

House price growth was due to the strong UK economy which fed demand for housing for which there was an acute shortage, "Increasing interest rates is fundamentally an artificial means of controlling the market. What we need to do is build more houses."

Updated: 11:17 Friday, August 06, 2004