British debt charities have sounded the alarm as 4mn mortgage borrowers face higher rates next year, increasing the average annual bill by £3,000 and piling pressure on household finances.

Concerns mounted on Thursday after the Bank of England increased interest rates to 3.5 per cent in an attempt to rein in inflation as prices increased by 10.7 per cent in the year to November.

The BoE warned earlier this week that half of UK homeowners, amounting to about 4mn people, will be hit by higher costs next year as their fixed-rate deals expire, making it harder for many homeowners to repay their mortgage.

The central bank said borrowers with rates that are due to expire by the end of 2023 will see an average monthly increase to their bills of £250, boosting the average monthly repayment to £1,000.

Debt charities fear that the sharp increase in costs could make mortgage costs unaffordable for many homeowners and urged them to ask their lenders for help.

“Rising interest rates are a clear and present danger to the millions of households who are looking to remortgage their fixed-rate deals in the coming year and beyond,” said Jane Tully, director of partnerships at the Money Advice Trust, the charity that runs National Debtline and Business Debtline.

“On top of the high cost of food, energy and other essentials, this additional pressure will tip many into financial difficulty — and we can expect to see an increase in mortgage arrears as a result,” she added.

Morgan Wild, head of policy at Citizens Advice, said: “People on expiring fixed-rate mortgages and those on variable rates will already be feeling the pressure. Meanwhile, private renters are increasingly exposed to having costs passed on to them through rent increases.

“We know people find it hard to ask lenders for help when they’re struggling with repayments. This is why banks must take the first step and ask customers if they need support when they reach the end of a fixed-term mortgage.”

The warnings come amid expectations of further rate rises next year. Economists forecast that they will go as high as 4.25 per cent, even though they believe inflation has peaked.

Mortgage brokers predict that mortgage rates could still edge down as the gilt market, off which fixed-rate deals are priced, had already accounted for the rate increase by the central bank last week.

“The bank rate rise was expected — gilt yields actually fell on that day which indicates it was factored in,” said Ray Boulger, analyst at broker John Charcol.

“The best five-year deal is at just over 4.5 per cent, which is as low as they’re likely to go for a few months. But there are still lots of lenders who have scope to reduce their rates. Tracker rates, which follow the bank rate, will clearly go up,” he added.

Figures from comparison site Moneyfacts show that rates have already begun to drop, with the average rate on a five-year, fixed-rate deal falling to 5.63 per cent, down from 6.51 per cent in October. However, they are still much higher than at the start of the year, when the average rate was 2.66 per cent.

Aaron Strutt, a product director at broker Trinity Financial, said: “We expect rates to stabilise and possibly get a bit cheaper providing the Bank of England does not increase the base rate significantly.”

He added: “Rates have come down quite substantially and we have five-year fixes starting from 4.5 per cent if you are purchasing a property and ten-year fixes at 4 per cent if you are remortgaging.”