'Guaranteed' rate rise will bring mortgage hike

A "thoroughly nasty set of figures" virtually guarantee that the Bank of England will raise interest rates in an effort to curb spending and borrowing according to financial experts.

Data released by the Office of National Statistics show inflation at 3.1 per cent while the retail price index hit a 15-year high.

Inflation exceeded the government target of two per cent triggering the requirement for the Bank of England to send an explanatory letter to the chancellor for the first time ever.

Increased inflation raises the likelihood of an interest rate hike. Howard Archer, chief economist at Global Insight, told the Guardian: "That essentially guarantees that the Bank of England will raise interest rates by a further 25 basis points to 5.50 per cent in May."

A rate rise like the one predicted by Mr Archer would add £1,500 a year to a £150,000 interest only loan. Some experts are even predicting a 50 point rate rise.

Minutes of the last Bank of England meeting show that two of nine policy makers voted in favour of raising interest rates in England, adding fuel to speculation that rates will rise.