Bank of England increases base interest rate to five percent

He said: “Lenders were probably already pricing in a 25 basis point move, but the repricing of home loans will be now be more dramatic and protracted.

“With the benchmark interest rate undergoing a step-change to a level not seen since September 2008, the coming weeks are likely to see a procession of raised loan rates – and a succession of eye-watering estimates of how much monthly and annual loan payments will increase as borrowers come off their cheap fixed deals.”

He spoke about what people can do to keep their repayments down. He suggested taking out a longer term loans such as a 30 or 35-year product as one option.

Mr Smith said: “Those struggling with the need to take a call on where the base rate will go in the coming year or two – in order to decide on a tracker or a fix – can also compromise by asking to have part of their mortgage fixed and part variable rate.

“In all this, a good mortgage broker can be very useful, not least because they are likely to handle the admin and communications with lenders more quickly and efficiently and therefore grab products whose shelf-life might be very short.”

The base rate hike will also impact people who have other debts as the interest on the amount they still owe may increase.

Dean Butler, managing director for Customer at Standard Life, warned this could affect pensioners who have debts or those approaching retirement who have credit card or a mortgage to pay off.

He said: “People who were planning to retire in the near future but still have mortgages or other debts face a tricky decision as the cost of borrowing continues to rise.

“The state pension by itself isn’t enough for a comfortable retirement even without housing costs or other debts, and many don’t have enough saved in private pensions to bridge the gap.”

The full basic state pension is currently £156.20 a week while the full new state pension is £203.85 a week.

Mr Butler added: “The costs are also likely to filter through to many of those who rent their property too. It’s difficult to believe how different things were until very recently – shockingly, rates only reached one percent last May.

“The speed and severity of the change has taken everyone by surprise, and people who were financially comfortable in the spring of 2022 might now find themselves struggling and having to reassess their plans, particularly as rate rises have been coupled with double-digit inflation.”