IT is the first law of economics. What goes down must come up.

After a series of interest rate cuts, the Bank of England has ordered a 0.25 per cent rise. In itself that should have limited impact. Nevertheless the move is bound to send a shiver down the spine of homeowners.

Analysts are agreed that yesterday's decision will not be the end of the base rate hikes. Many believe they will top five per cent next year.

While that is great news for anyone dependent on income from their savings, it bodes ill for millions of homeowners.

Because of the rocketing cost of buying a house, many people are saddled with mortgages they can barely afford even at the record low interest rates of recent years. Any significant rate rises bring with them the prospect of real hardship and, ultimately, the spectre of spiralling house repossessions.

One reason for the rates reversal is to discourage a nation up to its eyeballs in consumer debt from taking on more credit.

It will certainly make the naturally cautious borrower more reluctant to sign up for new loans. But the reckless spender is unlikely to be discouraged by anything other than belated restraint by the lenders.

According to one York estate agent, the Bank Of England's change of heart will not end the property boom either. This is a reminder of how blunt an instrument interest rates are. We need a broad range of policies to address the unsustainable property crisis.

Of one thing we can be sure: the rate rise is bad news for Tony Blair. His party suddenly seems more disunited than the rejuvenated Tories, and millions of houseowners are now being hit in the pocket.

New Labour's third consecutive election victory is no longer a formality.

Updated: 10:37 Friday, November 07, 2003