The Bank of England piled more misery onto hard-pressed homeowners today with a quarter point rise in base rate to a six-year high of 5.50 per cent.

With mortgage lenders poised to pass the increase on to their customers the seven million borrowers on variable rate loans – nearly two-thirds of homebuyers – will face higher monthly mortgage payments.

First-time buyers with a mortgage of £110,000 will see the monthly cost of a repayment loan rise by £16. Those with interest-only loans, often chosen by those on a tight budget, will pay an extra £22.

Borrowers with a £200,000 repayment loan will have to fork out an extra £30 a month. After four rate rises since last summer the cost of their monthly mortgage payments has risen by £116 to £1,228.

First-time buyers have been especially hard hit by the base rate rises. The Council of Mortgage Lenders says they are now spending an average of 18.1 per cent of their gross income on mortgage payments – the highest figure for 16 years.

In an attempt to limit the pain caused by rising interest rates, a record number (88 per cent) of first-time buyers are choosing to fix their mortgage rates so that they can put a ceiling on their monthly payments for a set period of time.

But many of those on fixed deals will not escape the impact of rising mortgage rates. Mform.co.uk, the mortgage comparison website, reckons more than 2.3 million homeowners are on fixed rate deals that will be ending this year. Since interest rates are now three-quarters of a point higher than they were two years ago, when most of these deals were taken out, borrowers will be hard-pressed to nail down a new deal as good as their previous one.

Francis Ghiloni, marketing and business development director of mform.co.uk said: “With further increases in the Bank of England base rate being predicted, people coming to the end of fixed deals need to act now or see their mortgage rates increase dramatically.”

Those who fail to switch to another fixed rate and end up on their lender’s standard variable rate (SVR) – likely to be around 7.6 per cent – will have to dig even deeper into their pockets. A borrower with a £150,000 loan on fixed rate of 4.5 per cent expiring now would end up paying an extra £285 a month on their lender’s SVR.

Even someone who moves from a maturing fixed rate of 4.5 per cent to the cheapest two year fix currently available – Bradford & Bingley’s two-year fix at 4.99 per cent – would be paying an extra £42 a month on a £150,000 loan.

One of the problems faced by those seeking another fix is that lenders have already priced the latest rate rise into their deals, making them less attractive.

Those who think interest rates are at or near their peak may be happier with a variable rate deal. Leek United building society currently has a Lifetime Tracker mortgage at base rate plus 0.08 per cent, giving a current rate of 5.58 per cent. There are also some attractive discounted rate loans available. Newcastle building society’s two year deal has a discount of 2.69 percentage points on the SVR of 7.34 per cent, giving a current rate of 4.65 per cent. Newcastle has yet to lift its SVR following the base rate rise, but even if it increases it by a quarter point, the loan rate would still be an attractive 4.9 per cent.

While the rate rise is bad news for borrowers, it is good news for savers. The latest increase should take the best buy rates on easy access accounts close to the 6 per cent mark. But Sue Hannums, of AWD Chase de Vere, an independent financial adviser, says savers should be on their guard because not all banks and building societies pass on the full rate rise to their customers.

Investors in the share and bond markets had largely priced the rate rise into the market. Matthew Butcher, head of research at Brewin Dolphin, the stockbroker, said: “Share investors should be reassured that inflation is being reined back even if the rate rise means people are buying fewer jumpers in Next.”

Meanwhile bond investors will now be keen to examine the comments of the Monetary Policy Committee, due to be published next week, for clues as to whether it plans a further rate rise in the coming months. Another rate rise would continue to depress bond prices.

Rising UK interest rates mean this is a good time to exchange your pounds for foreign currency, says David Nicholls, of Moneycorp, a foreign exchange dealer. But he adds: “The current rates for the dollar and euro have already adjusted for the latest rate rise so if you are going abroad in the next couple of months you might as well buy your foreign currency now.

“Those buying a property abroad may want to take advantage of the current strength of sterling to lock into a rate now and convert currency at that rate at any time in the next 18 months.”