Homeowners on certain mortgage plans could have to fork out an extra £1,000 a year if the base rate continues to rise, Chancellor Rishi Sunak has warned.
The Tory MP warned the cabinet against borrowing more to fund public spending, with interest rates expected to go up by 2.5% over the next year.
He added that if homeowners are not on a fix-rate deal, they could have their mortgage payments increase by more than £1,000 a year, the Mirror reports.
Sunak forewarned of a series of interest rate rises, which could amount to 2.5% and cautioned against borrowing so as not to stoke inflation further.
He said that a one percentage point rise on a standard mortgage equated to £700.
When the base rate – the interest rate benchmark set by the Bank of England – rises, those who are not in a fixed deal could see their payments rise overnight.
Those who are on lender revert rates or Standard Variable Rates (SVRs) and tracker rate mortgages are most likely to see the rate passed on in full.
A fixed rate mortgage could provide a safe haven against the rise as it locks you in a deal for a set term - but you'll have to act fast as the advertised rates on these products tend to go up as soon as the base rate does.
Sunak is under pressure from Tory MPs and some cabinet ministers to do more to help people with the cost of living.
The Chancellor is understood to be planning a major intervention in his autumn budget, before the energy price cap rises further.
Mr Sunak has previously said it would be "silly" to intervene now.
Forecasts suggest that energy bills could rise by as much as 40 per cent in October to nearly £3,000 a year.
He said: "It would be silly to do that now, or last month, or the month before, when we don't know exactly what the situation in the autumn is going to be."
He defended himself against controversy around his own finances, which includes his wife's non-domiciled tax status and his £13,000 a year swimming pool.
"Judge me on my actions," he said. "I don't judge people by how much money they have in their bank account, I look at their character, their values and how they're acting."
Sunak said: "Of course now I'm in a fortunate position, but I didn't start like that."
He said that his achievements were "a result of so many people's kindness, hard work sacrifice throughout my life", citing his grandparents arriving in Britain with very little.
He added: "I never forget the values that I was raised with, and actually what I then try and do is express those values through the work I do in this job."
Sunak said he was working "day and night" and that getting into politics was "my way of trying to use all the things that have been given to me to make a difference".
One measure being considered is a shake-up of the MOT system.
But Karl McCartney, a Conservative member of the Commons transport committee, said it was "absolutely crass" to suggest that changing rules on MoTs would help significantly with the cost of living.
He said the money saved on a £54.85 test was "a drop in the ocean" for drivers.
Transport association the AA also said it would still lead to increased bills from repairs.
Anne-Marie Trevelyan, the international trade secretary, also poured cold water on a plan to cut tariffs on imported food, saying it would have a tiny impact on bills.
Trevelyan is said to have been unaware of a plan floated by Jacob Rees- Mogg, the Brexit opportunities minister, and told MPs that while "all of us across every department are very focused on thinking about ... where we can find ways to reduce costs", the plan was mired in legal complexities over World Trade Organisation rules.
Other measures being considered ahead of the May election campaign include a push towards benefit support.
About £15billion of benefits are believed to go unclaimed each year.
This includes 1.3million families who do not take up an offer of up to £2,000 a year for childcare costs.
Other savings cover those living alone who are unaware they could be due a single-person discount on council tax – calculated on the assumption that two adults live in a property – and get 25% off their bill.
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