This situation is driven by the rising swap rates lenders pay, which largely influence the cost of fixed-rate mortgages.

The potential shift to 5% mortgages stands to impact first-time buyers and those seeking to remortgage, augmenting an already tumultuous year for mortgages. Households currently on a £150,000 mortgage at 2.99% would need to accommodate an additional £2,100 annually or £175 monthly if the replacement mortgage was priced at 5.19%.

Nationwide has already announced an increase of up to 0.45% in selected fixed and tracker rates. The changes are designed to ensure their rates remain sustainable amidst increasing and fluctuating swap rates.

In a Sky News interview, Chancellor Jeremy Hunt endorsed the potential of a UK recession to curb escalating inflation. He argued that tackling inflation is necessary to promote economic stability, even if it could potentially induce a recession.

The Bank of England’s struggle to control rising prices has led to rising government bond yields, which in turn have caused mortgage rates to increase. Recent inflation figures have led to speculation that the Bank will hike interest rates from 4.5% to 5.5% by November. These predictions have influenced bond yields, with the two-year gilt yield rising to 4.55% following the inflation announcement.

Luke Hickmore, investment director at abrdn, commented on the mortgage rates situation, stating that the unexpected inflation figures have reshaped market forecasts.

Mr Hickmore said: “The shock print for inflation this week has very quickly reset most forecasters expectations of where the peak in the Bank of England rate will be. Interest rate markets are now pricing in 5.25% peak at the end of December 2023, with a significant probability of 5.5% in early 2024.

“We will see mortgage fixing rates adjust to this new dynamic, in the short term at least. If the rate rises in June, that will be the 13th straight rise in interest rates from the Bank and the mortgager providers will adjust to reflect the extra cost of funding those mortgages, passing it on to consumers.

Mr Hickmore continued: “What we have seen, however, is the initial shock move higher in mortgage rates seen post the failed fiscal event in the autumn, faded as time went by, with competition to provide mortgages remaining very strong.

“Profitability for the banks is tough now, with rising deposit rates needed to keep those deposits, higher financing costs in the wholesale market, continuing strong competition in the supply of mortgages, and of course, higher costs across their businesses

“The rises we have seen from the likes of Nationwide today, with others to follow, will relieve some of this margin pressure. However, the forces of competition will keep a lid on those rises, and any sign of inflation moderating and rates not rising to these levels will be good news for mortgage rates – just not yet.”