Many homeowners could be facing severe debt problems in the not too distant future economic experts have warned.

According to a prominent economic think-tank, the Bank of England will need to stop inflation from running away as this will cause the base rate to spiral quickly – driving up the costs of homeloans out of control.

If this happens then many householders with outstanding mortgages could see their monthly repayments rocket by over £900 per month.

Most homeowners have been shielded from the recession to some degree, by record low borrowing rates on their homeloans. But fears have been expressed that as interest rates rise many more may find their household incomes wiped out by higher payments.

Speaking to the Daily Mail newspaper, Andrew Lilico from Policy Exchange said: “To keep inflation down to 10 per cent for one year, the economy will have to be able to tolerate interest rates of perhaps 8 per cent.”

Mr Lilico’s sentiments are in-line with the opinions of former Bank of England deputy governor, Sir John Gieve. He argues that the base rate will rise by 2.5 per cent within a year, from its record low of 0.5 per cent at present.

Mr Lilico believes the low average mortgage rates of around 4 per cent mean millions of households have been protected from the full effects of the economic downturn.

His predicitions suggest that an 8 per cent interest rate could push the average monthly mortgage repayment up by over £900 per month on a £150,000 property.

However, other economists argue that the low interest rates are here to stay for the time being, as the recovery from the recession remains weak.

Are people more worried about money than ever?