Householders have been hit with a double whammy of bad news as mortgage payments are set to go up and the UK economy is predicted to take a dive.

Homeowners were warned to prepare for an increase in mortgage payments as the Bank of England's base rate went up by half a per cent.

Bank of England forecasters added to the gloom by forecasting that the UK economy would formally go into recession during the last three months of 2022 and that the economy was likely to contract throughout 2023.

That came on the same day as Ofgem confirmed that the price cap would change every three months, rather than six, in a bid to prevent more energy companies from going bust during the winter – raising fears of more frequent price rises.

Joanne Leek of the Suffolk Building Society said most mortgage rates did not automatically follow the Bank of England rate – but she did expect an adjustment to charges in the very near future.

A 25-year £150,000 mortgage at 2% would currently cost £758.83 a month. If the rate rose by 0.5% to 2.5%, this would be a monthly cost of £794.85 – an increase of £36.02.

That would hit families' bills on top of energy price rises – and the increased cost of living. The Bank of England also forecasts that inflation could rise to 13% next year.

Ms Leek said it was not possible to say how high rates would increase – but at present, all the pressure was upward on rates.

Debt services expect the news about mortgages and energy bills to push more people towards financial problems.

Rev Nic Stuchfield, from the Suffolk Coastal Debt Centre, said the centre was already getting more inquiries from people struggling to make ends meet and the threat of more energy bill rises would cause further problems.

He said: "The news today is very worrying because an increasing number of people are having very great difficulty in making ends meet, especially with the increase in energy bills.

"We have only had a few inquiries so far from people with mortgages – but if rates do go up significantly over the next few months I expect we will get a lot more."

He added that while the news about interest rates, inflation and a year of negative growth was grim, one bright spot was that there were still many job vacancies in the area – and the increases in minimum wage levels had been good for those on the lowest pay rates.

However, the pressure from so many quarters meant many people could really struggle even if they are working.

Suffolk businesses were also concerned to hear about the interest rate increases.

Paul Simon, head of public affairs and strategic communications at the Suffolk Chamber of Commerce, said: “What is so frustrating about this news is that, once again, the Bank of England’s projections on inflation have had to be revised upwards and those for growth downwards.

"Had they taken the evidenced concerns of Suffolk Chamber and its members – and that of others – seriously they would have appreciated the depth of the coming storm over 18 months ago – and reacted in a more proactive and possibly less damaging way in terms of interest rate rises.

“As it is, businesses are now facing the implications of the sixth interest rate rise in as many months.

"Given the recent reductions in business activity as recorded in our quarterly economic surveys – cash flow down, turnover down, profitability down – we are now very worried about the impact on future business growth indicators, including investment and recruitment plans.

“Suffolk Chamber is reduplicating our longstanding call for an immediate pro-business programme of fiscal reforms, comprising temporary reductions in VAT and duty on fuel, a cap on energy price rises for smaller firms and a reversal of the recent ill-timed increase in NI Employer contributions.

"Suffolk businesses are resilient and imaginative, but they are not miracle workers and need Government to lighten the load as they cope with the next couple of years’ projected turbulence.”