Influential think-tank Policy Exchange thinks rates will soar over the next couple of years in order to combat rampant inflation. While that's great news for savers struggling to find decent rates of return, it could spell disaster for millions of homeowners on variable-rate mortgages who've been enjoying low rates ever since the Bank of England cut the base rate to 0.5% in March 2009.
If interest rates were to increase 16-fold, in line with the think-tank's predictions, that would add a massive £900 to the average British homeowner's monthly mortgage payment.
Conflicting predictions
Not all economists believe that interest rates are set to rise so sharply, though.
Economic forecasting group the Ernst & Young ITEM Club, for example, recently predicted that interest rates were likely to remain slumped at 0.5% - where they have been since March last year - until as late as 2014.
However, former Bank of England deputy governor Sir John Gieve last month said that he expects rates to start rising "faster than the market currently expects".
His forecast is for the base rate to rise to 2.5% within a year, from its current historic low of 0.5%.
Even an increase of this level would significantly increase the amount homeowners on variable-rate mortgages have to find to cover their monthly repayments.
How to protect yourself against rising rates
So with the next base rate move certain to be upwards, what steps should homeowners take to protect themselves from bigger payments and potential financial hardship?
The average interest rate paid by homeowners with the base rate at its current low level of 0.5% is about 4%.
The interest payable on a typical £150,000 loan at this rate is about £6,000 a year, or £500 a month.
But if the base rate leaps to 8%, the interest on a mortgage of this size could soar to £17,250 a year, or more than £1,400 a month. And that's before you take capital repayments on the original loan into account.
Anyone concerned about interest rates rising should therefore consider a fixed-rate deal that will protect them from any future problems.
Hannah-Mercedes Skenfield, head of mortgages at moneysupermarket.com, said: "If you are on a tight monthly budget, which cannot stretch to meet interest rate rises, the only sensible option is a fixed rate deal - even if it is more expensive at first."
What are the best fixed-rate deals available at the moment?
The lowest fixed rates are generally reserved for deals lasting shorter lengths of time.
The best two-year fix on the market at the moment is from ING Direct at 2.79%, with a £945 fee. You must have a deposit of at least 40% to qualify for the deal, though.
Borrowers with a deposit of 30% can qualify for Market Harborough building society's two-year deal at 2.89%, but the bad news is that the fee is a whopping £1,295.
Those keen to shelter themselves from the impact of rising interest rates would probably be better off with a longer-term fix.
Hannah said: "I think five-year deals look a better option than two or three-year fixes at the moment because you might have to remortgage as rates are rising if you go for a short-term fix."
Over five years, HSBC leads the field with a rate of 3.95% and a £599 fee. Again, however, you must have a 40% deposit to qualify.
For those with 25% to put down, Yorkshire Building Society has the best offer at 3.99% with a £995 fee.
Meanwhile, if you are prepared to lock into a mortgage for 10 years, Yorkshire is again offering one of the best deals.
Its 10-year fixed rate is 4.99% and the fee is £495. It is available to anyone with a deposit of 25% or more.
I would rather take my chances with a tracker. What are the best deals?
If the ITEM club is right and interest rates stay down at 0.5%, tracker mortgage borrowers could end up paying rock-bottom rates for the next four years.
The problem is that you are gambling on your ability to keep up with your mortgage payments should rates go up - and you could end up losing your home if the gamble fails to pay off.
That's some pretty high stakes by anyone's standards.
Hannah said: "If you are in any doubt about being able to pay your mortgage in the future, it is probably not a gamble worth taking."
However, if the temptation of low repayments now, plus the possibility of low repayments for the next four years, proves irresistible, HSBC's lifetime tracker is definitely worth a look.
It has a current pay rate of 2.19% and a fee of just £99.
Should rates start to rise, one of the biggest advantages of the deal is that is has no early repayment charges - meaning you can switch anytime - but it is only available to borrowers with a deposit of 40% or more.
If you are keen for a shorter-term deal, and have a 40% deposit to hand, NatWest is offering a two-year tracker at the slightly cheaper rate of 2.19%, or base plus 1.69 percentage points, and a £999 fee.
Please note: Any rates or deals mentioned in this article were available at the time of writing.
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