THE latest rise in interest rates is unlikely to have any effect on house prices in Oxford, according to local estate agents.

And one expert in the city has claimed that the rate would need to climb by another 1.5 per cent to cool down the property market.

Yolande Barnes, director of research at Savills, said last week's decision to push up the Bank of England base rate by 0.25 per cent to five per cent is unlikely to have an impact on the value of homes.

She said: "We think interest rates would have to rise to around 6.5 per cent before the house price growth would start to slow."

Judith Durham, manager of Cluttons estate agents in the city, was more circumspect.

She said: "It may just make people think a little more carefully - but this area is so buoyant with so many people wanting to buy that it is not going to have much of an effect.

"If it rose by another 0.25 per cent then it might slow it down, but the mortgage companies are still offering very good deals and a lot of people are taking out long-term, fixed-rate loans."

The decision to raise interest rates to their highest level in five years has left Oxfordshire homeowners counting the cost.

Many will be forced to dig deep after the rate rise, which will mean the interest on a £150,000 mortgage will cost about £30 more next month.

First-time buyer Bridget Taylor, 25, has only just agreed her mortgage on her flat in Wallingford and now the payments will rise immediately.

She said: "I have spent so long shopping around for a mortgage, trying to get a deal I could afford and now this happens."

Public relations executive Ms Taylor added: "As a first-time buyer I was already pushing myself and now this is going to stretch me even further."

Interest rates are now at their highest point since August 2001 and come amid evidence that more households are folding under the strain of higher overheads, such as council tax bills and energy prices.

Government figures reveal 423 possession orders were made in Oxfordshire between January and September this year, compared with 316 during the same period last year - a rise of 34 per cent. Of this year's tally, 301 were ordered by Oxford County Court and 122 were granted by Banbury County Court. The average rise for the South-East was 20 per cent.

A possession order does not necessarily lead to eviction because homeowners are given a final chance to negotiate a compromise with their lenders.

But it is a sign that many are being pushed over the financial brink as national figures revealed a record 27,644 people became insolvent during the summer, fuelling forecasts that more than 100,000 people could go bankrupt or take out individual voluntary arrangements in the year as a whole.

Meanwhile, Oxfordshire business leaders have called on the Government for an assurance that there will be no further rate rises in the near future.

Christina Howell, head of external affairs at the Oxfordshire Chamber of Commerce, said: "The Bank of England must take into consideration the adverse impact that a rise in rates could have upon business investment. Oxford benefits from a strong and buoyant economy in comparison to other areas of the UK, and to protect this we must ensure business confidence to invest is not jeopardised.

"Businesses already have to contend with transport, rising salary costs and a likely increase in business rates. Under the current economic conditions there is certainly no case for any further interest rate rises that would damage wealth-creating business."