Mortgage rates could be sent soaring as lenders respond to Rishi Sunak's autumn budget, analysts have warned.
The chancellor's "big state, high tax" spending package received a "lukewarm reception" from Conservative grandees, The Guardian said, who "put him on notice that they would not put up" with "the scale of spending and taxes" for long.
According to the Financial Times, Sunak attempted to placate backbench anger by telling MPs that "every marginal pound we have should be put into lowering people's taxes" shortly after his budget announcement.
But that has done little to dissuade mortgage lenders from immediately raising rates, prompting predictions that mortgage rates could rise rapidly.
An interest rate rise has been discussed for some months and City economists believe Sunak's higher spending could force the Bank of England's hand.
Millions of households could face higher mortgage payments, with interest rate increases expected next week as a result of Sunak's "spending splurge", said The Times.
"Markets are certain" that the interest base rate "will rise from 0.1% to 0.25%" next Thursday, the paper added, with some analysts warning it "could hit 1% next May, four months earlier than they were expecting" prior to Sunak's budget.
"Millions of borrowers" face a "sharp increase" in their mortgage bills as a result of the base rate change, The Telegraph said, squeezing household finances that are "already suffering from a decade of stagnant wages".
Borrowers on variable rate mortgages, "of which there are an estimated 2.2m in the UK", look set to be "hit hardest", the paper continued. "Rates for these homeowners are not guaranteed, unlike fixed-rate deals."
Although householders on fixed-rate mortgages, which are typically the most expensive, will be protected from any immediate rise in interest rates, analysts said those with "super cheap" deals "could be in for a shock when they come to remortgage".
Mortgage Solutions said that "expectations for rising mortgage interest costs predicted by the Office for Budget Responsibility (OBR) were buried in the budget documents". The OBR has forecast that the Bank of England interest rate could rise to 3.5% in 2023, up from 0.1% at present.
Analysis by The Institute for Fiscal Studies for The Telegraph found this would mean "homeowners paying thousands of pounds more each year", as "it would see annual mortgage repayments soar 43% from £10,800 to £15,400 on an average-price house".
Liberal Democrat leader Ed Davey said that interest rate rises would hit southern Tory seats hardest, as those seats tend to have the highest house prices outside London. He accused the Conservatives of "turning their back" on traditional party supporters who were "tired of being taken for granted".
Earlier this month, Money Saving Expert founder, Martin Lewis, warned that a rate rise was "on the cards". He advised "everyone with a mortgage" to check now "if your existing deal is as good as it can get", adding: "That applies double if you're languishing on your lender's standard variable rate."