The Bank of England will decide tomorrow whether it needs to increase its base interest rate for the ninth consecutive time.
Interest rates were pushed up by 0.75 percentage points last month to 3%. This was the biggest rise in more than 30 years.
Analysts expect the Bank will hike its base rate to 3.5% on Thursday, which would be another 14-year high for the UK.
The move will make the cost of borrowing, including certain types of mortgage deals, even more expensive than they currently are.
The average mortgage cost could surge by £3,000 a year next year, according to the Bank's Financial Stability Report.
About four million UK households will face higher mortgage payments next year. The types of mortgage deals affected by the base rate are tracker deals.
Standard variable rate (SVR) mortgages tend to go up in line with the base rate too, although it is down to your lender to decide whether to pass on any increases. Most do decide to do this.
If you're on a fixed mortgage deal, you'll only be impacted when your current rate ends.
But the trouble is, millions face paying hundreds of pounds more when they do come to remortgage, due to how high rates have risen over the last year.
Currently, in the UK, there are around 2.2 million homeowners without a fixed-rate mortgage deal.
The exact amount that a mortgage repayment will rise by will depend on the size of the mortgage, the rate at which it is fixed, and the loan-to-value ratio when you remortgage.
The Bank of England is increasing its base interest rate to attempt to curb rising inflation in the UK which is currently sitting at 10.7% as of today.
The UK’s rate of inflation hit a 41-year high of 11.1% in October and was driven by soaring gas and electricity prices.
Some financial analysts suggest that interest rates could reach as high as 4.5% next year.
On top of this, the Bank of England expects a year-long recession starting in 2023 which will add further financial pressure to mortgage holders.
The effect of missed mortgage payments on someone who is struggling to pay can stay with them for a long time.
Missed payments can stay on a credit report for six years and it acts as a red flag to lenders when it comes to remortgaging or simply applying for another form of credit.
Lenders usually check a customer's credit report during the application process, and the best deals are reserved for those with the best scores.
Alastair Douglas, CEO of TotallyMoney said: “It’s essential you contact your lender if you're finding it difficult to keep up with mortgage repayments.
“Just last week, the Financial Conduct Authority set out a number of ways in which they expect firms to support borrowers impacted by the soaring cost of living.
“These measures include allowing customers to make lower repayments, switch to interest-only, or moving to a different rate on their mortgage. So there is help if you need it.”
