As inflation continues well above the Bank’s target rate of 2pc, the Office for Budget Responsibility, the Treasury’s official forecaster, expects that the Bank Rate will rise to 0.75pc by the end of 2023. This would trigger a 13pc year-on-year jump in interest rates on mortgages.

The jump could be far more extreme. If inflation is driven by pressures from the product or labour markets, rather than temporary supply chain disruptions, the Bank Rate could instead rise to 3.5pc. This would be the highest level since November 2008. 

Any rate rise will hit hard in the wake of rapid house price growth that has dramatically reduced affordability. In short, it would trigger the end of the house price boom.

Hikes will hammer affordability

When the Bank Rate was at 0.1pc, a homeowner spent 38pc of the median income to service an 80pc mortgage on an average priced home  – or £827 per month, according to Capital Economics consultants.

If the Bank Rate rises to 0.5pc, as forecast, and this hike was immediately passed into mortgage costs, the monthly costs would rise to £881, or 40.3pc of their disposable income. However, lenders would likely absorb some of the hike. Capital Economics estimated that in this scenario monthly costs would rise to £832 — still roughly 38pc of income.

However, at 1.5pc, monthly mortgage costs would jump £100 to £932. This would be equivalent to 42.6pc of median earnings. If the hike was passed entirely to borrowers, the share would hit 45pc. Both scenarios mean homes would be more unaffordable than any point since 2008. 

A hike to 3pc would mean a £200 jump in monthly payments, even if it was partially absorbed by the banks. This would take the cost to 47.5pc of earnings.