Borrowers have been told to “buckle up” as the country’s largest lenders move to increase interest rates ahead of more mortgage misery.

It comes as lenders react to yesterday’s 0.5% increase to the Bank Rate, taking the central interest rate, used by lenders alongside other market indicators to set pricing for borrowers, from 1.75% to 2.25%.

Market analysis by specialist property lenders, Octane Capital, has revealed that the average cost of a mortgage has climbed by as much as 34% since the first interest rate increase in December of last year, adding hundreds of pounds a month to mortgage repayments for homebuyers who are already struggling with the cost-of-living crisis.

Octane Capital analysed the cost of the average full monthly mortgage repayment for homebuyers entering the market via four of the most common mortgage products, as well as how the cost of these products has changed since the first base rate increase back in December of last year.

When it comes to the costliest route for homebuyers when negotiating the current mortgage market, a two-year fixed rate mortgage at a 95% loan to value requires the highest monthly repayment.

With an average fixed rate of 3.97%, up from 2.77% in December, homebuyers opting for this product in the current market will be required to pay back £1,460 having placed a 5% deposit to begin with.

Those opting for a standard variable rate product and placing a 25% deposit are also paying some of the highest costs at present. With the highest average rate of 4.54%, again up from 3.61% since December, homebuyers are facing an average monthly repayment of £1,179.

However, both products have seen the cost of a monthly repayment increase by 23% and 19% respectively, a lower rate of increase compared to both a two- and three-year fixed product at a 75% LTV.

The average mortgage rate on a two year fixed mortgage has seen the largest increase, climbing by 1.94% since December of last year, now averaging 3.51%. At 3.31%, the average rate available for a three year fixed mortgage is now 1.92% higher than it was back in December.

As a result, the average monthly repayment for both a two year and three year fixed rate mortgage has climbed by 34% so far this year, with the average monthly cost of a two year fixed mortgage up by £284 per month to £1,098, while the average three year product is now £274 more expensive when it comes to the average repayment, costing £1,075.

The CEO of Octane Capital, Jonathan Samuels, commented: “It seems as though everyday there’s yet more gloomy news around the ever increasing cost of living and, unfortunately, the cost of borrowing to fund a property purchase is just one household finance that is climbing at a considerable rate.

“Since the first of numerous interest rate increases in December of last year, lenders have had to react to a landscape that has become increasingly uncertain and volatile.

“This means that regardless of what mortgage product you opt for, those looking to purchase now will be paying hundreds of pounds more a month compared to just a few months ago.

“With the Bank of England also due to increase interest rates again this week, this cost is only going to increase and many lenders will have already been adjusting their rates in anticipation of another base rate increase.”

Housing industry reacts to latest Bank of England interest rate hike