Mortgage lender warns of sharp interest rate rises in late 2010.

According to a new report by state-owned mortgage lender SBAB homeowners are facing sharp increased interest rates by the end of the year.

The Riksbank's key repo rate will be kept at record low 0.25 percent until after the summer. The institute predicts the Riksbank to hike interest rate by the autumn and to continue sharply into 2011.

"The bottom for longer-term fixed mortgages has been reached and they will start to rise during the first six months of 2010," Tomas Pousette, SBAB's chief economist, told thr TT news bureau.

"By the end of 2011 we expect that three-monthly interest rates will have risen to around 3.5 percent," he says.

By the end of this year interest on a quarterly-fixed mortgage will be around 2 percent, the institute predicts.