Mortgage bills are set to rise by more than a quarter for sub-prime borrowers, a report showed yesterday.

Standard & Poor’s, the credit rating agency, said that homeowners with a troubled credit history would have to pay an average of 26 per cent extra every month, with some facing increases of 60 per cent, when their fixed-rate home loan deal comes to an end.

About 80,000 people are due to come to the end of a fixed-rate sub-prime deal before the end of next year.

S&P said that nearly £9 billion of fixed-rate loans, nearly a quarter of the sub-prime market, are due to come to an end before the end of next year, with about £5 billion ending in the first half of 2008. There are an estimated 230,000 to 300,000 sub-prime borrowers in the UK.

Five base-rate rises since last August had already heralded trouble for some borrowers, but the recent credit turmoil has forced sub-prime lenders to increase rates further. Some lenders have increased rates by one percentage point or more in the past six weeks.

Many lenders have also tightened lending criteria, making it more difficult for borrowers to lock into a competitive fixed-term deal.

S&P said that if current market conditions persisted, some homeowners may be unable to meet these lending criteria and be forced to pay significantly more on expensive “floating rates”. It said: “It is worth noting that those few borrowers who do fail to refinance in this scenario see an average payment shock of £415 or 60 per cent, corresponding to nearly an additional 13 per cent of gross incomes.”

The pain has already arrived for some borrowers. Thomas Reeh, of BlackandWhite Mortgages, a specialist broker, said: “We have already seen customers whose payments have gone up more than 50 per cent. The combination of seven interest-rate rises and lenders upping their rates and fees will be crippling for many.”

Some lenders have also raised their arrangement fees - I-Group, a sub-prime lender, recently increased its “establishment fee” from £750 to £1,250. While some lenders, such as Victoria Mortgages, have closed to new business, others have been accused of effectively withdrawing from the market because their rates are so high.

Mr Reeh said: “It doesn’t help that many non-conforming lenders have simply and silently withdrawn from the market because they aren’t making suitable shareholder returns.”

S&P also predicted that an increasingly tough environment for stretched borrowers would mean that home repossessions would rise further.

A struggle by banks to secure funds to square their books at the end of the third quarter triggered a worrying resumption of stresses in short-term money markets, after several days in which these strains had appeared to be easing.

In the eurozone, three-month inter-bank interest rates rose to 4.972 per cent, their highest since May 2001.

In London, overnight sterling Libor interest rates jumped to 6 per cent, from 5.8 per cent on Thursday. More reassuringly, however, three-month sterling Libor rates were fixed at a seven-week low of 6.30375 per cent, down from nine-year highs above 6.9 per cent set earlier this month.