Did not get any comments here but after discussing with my hosting service and explaining the permission issue, I got their comment as per below (might be of interest to some). I did the automatic update but I was then puzzled I was asked all login data for FTP to the server. Fortunately I did type in the right stuff (copied what my FTP was using) and the automatic upgrade worked against my expectation. So, solved.
from the service provider:
"In an effort to prevent compromises of WordPress blogs we recursively locked all 'wp-blog-header.php' files on the blog server. There was a known exploit that allowed writing to that file. I have removed all of the immutable attributes for your files in htdocs and you should now be able to change the permissions as you like.