It will bring financial pain to seven million home owners with floating interest rates who will see a jump of almost £200 on a typical monthly mortgage payment.
Charities have already warned that repossessions are likely to rise next year and the threat of a succession of quick interest rate rises will exacerbate their fears.
The Confederation of British Industry predicts that higher than anticipated rises in the cost of living will push the Bank of England (BoE) to begin increasing interest rates in the spring.
It predicted that the Bank base rate – the interest rate at which the BoE lends to other banks – will rise more than two percentage points by the end of 2012. Mortgage rates are expected to follow closely behind.
“Many households have been benefiting (from the low interest rates) in terms of mortgage payments, but that will start to turn over the next couple of years,” said Lai Wah Co, the CBI’s head of economic analysis. (more)