The Times reports that chancellor Rishi Sunak believes that interest rates will rise by 2.5% over the next 12 months.

It says he reported this to the cabinet on Tuesday, allegedly adding that homeowners who are not on a fixed rate deal could see their mortgage payments rise by £1,000.

According to Trussle, the Bank of England moving the interest rate in March from 0.5% to 0.75%, would have added over £300 on to the average mortgage, which came on top of increases in December 2021 and February, which together added £650 on to the average mortgage.

According to the firm, 800,000 households are currently on a standard variable rate.

And fixed rates themselves have been steadily rising since the end of 2021.

According to Moneyfacts, in January this year, the average two-year fix stood at 2.38% and the average five-year fix was at 2.65%.

As of last Friday, the average two-year fix came to 2.98%, while the average five-year fix was priced at 3.11%.

Bank of England members will next meet on 5 May to decide whether the base rate should move again or not. Many market watches believe another increase is on the cards.

Trussle head of mortgage operations Amanda Aumonier says: “Given the recent history of low interest rates, many have not needed to keep an eye on their mortgage deal, as there wasn’t much variability in tracker rates.

“However, with interest rate rises set to continue like clockwork throughout the year, timing is now key. Homeowners could find a huge difference between fixing in a long term deal now compared with the end of the year.”