There is almost no work performance that can be sustained for more than a certain amount of time. For programming for example, it has been shown that working more than 40h/week, people tend to introduce more errors, actually reducing their overall productivity, as finding and removing the errors uses up more hours than the increase of work time.
For other jobs, longer working hours bring with it long term health problems.
Thus, increasing your weekly hours usually is not a good idea in the first place.
Especially not if the math does not add up.
Obviously, your company is very fond of your work. At least they said so. I would consider asking them for a raise without increasing the work hours based on their compliment and reasoning for the change.
As some pointed out, I do not answer the ops question. I so far just added some other aspect to make the decision easier. Let me add to this:
The math is easy. Getting paid 110% for 125% of hours results in a pay of 88% of the former hourly rate.
Add in that, most probably, a 10% raise will result in higher taxes, taking you into a higher progression class (depending on your tax system), and sometimes the same happens with other deductions, you will actually not earn 10% more, but even less.
Another thing that can happen is that due to what I pointed out first, either you or your manager will actually notice the performance drop owned to the additional hours, and either one of you will feel less happy with it.