Soaring interest rates could add more than £13bn to household mortgage bills by the end of next year, according to new analysis conducted for The Mail on Sunday.

The Bank of England raised interest rates by 0.5% to 2.25% last month, with further significant increases are in the pipeline in an attempt to bring down soaring inflation.

Financial markets are expecting the base rate to rise as high as 6% next year. Many lenders are currently charging close to 5% on two-year fixed deals.

There are mounting fears that a wave of mortgage defaults could adversely affect house prices and leave banks and building societies with rapidly rising bad debts on their balance sheets.

An estimated 2.1million fixed-rate mortgage deals will expire between now and the end of next year.

Tom Bill, head of UK residential research at Knight Frank, said: “Cuts to energy bills, income tax and national insurance could become footnotes in Liz Truss’s economic plan, all dwarfed by higher mortgage bills.”

“The recent volatility is naturally causing buyers and sellers to hesitate. The only thing that moves quickly in the UK housing market is sentiment and it’s been damaged over the last seven days,” he added. “Even if the government can start to reverse the impact of the mini-Budget, the reality of higher rates has dawned on people, wherever they end up peaking.”

Bill says that it “feels almost inevitable” that property prices will fall next year

He continued: “Average UK prices have risen by 23% since the start of the pandemic, so even if they declined 10% in 2023, this would take us back to where we were last summer.”

‘The decade long house price growth party is over’ as buyer demand falls