Hundreds of thousands of homeowners will be hit by massive increases in their monthly mortgage payments after yesterday’s interest rate rise.

Borrowers who locked into a fixed-rate deal two or three years ago will have to pay more than a hundred pounds extra for their mortgage each month when their current fixed-rate deal expires.

About 750,000 borrowers are due to come to the end of their fixed-rate mortgage deal in the next six months, the Council of Mortgage Lenders said. A further 1.25 million will come to the end of a fixed-rate deal next year.

A typical fixed-rate mortgage runs for two, three or five years, and gives borrowers the certainty of knowing what their repayments will be each month. But two years ago homeowners could pick and choose from deals pegged at about 4.4 per cent. Now there are few deals at under 6 per cent. A borrower with a £200,000 mortgage coming to the end of a two-year fixed-rate deal will have to find an extra £120 a month or £1,440 a year, even if they clinch one of the cheapest rates currently on the market.

Some lenders have already announced they are set to pull their most competitive fixed-rate deals, which will increase the burden for homeowners. Cheltenham & Gloucester and Lloyds TSB are set to axe some deals today and other lenders are likely to follow.

The added hitch is that lenders offering the cheapest rates are recouping their money by charging arrangement fees of hundreds or even thousands of pounds. Borrowers tempted by Northern Rock’s deal at 4.79 per cent will have to pay an arrangement fee of 3.5 per cent of the value of their loan. A homeowner borrowing £150,000 would have to pay £5,250. Once this fee is added to the two-year deal, the interest rate effectively rises to 6.34 per cent.

There is even worse news for borrowers who don’t arrange a new mortgage deal before their old rate comes to an end. They will be bumped on to their lender’s expensive standard variable rate (SVR). The average SVR is currently 7.5 per cent, but is likely to rise to about 7.75 per cent once lenders take yesterday’s rate rise into account.

A borrower with a £150,000 loan would see their repayments increase by a third if they fail to secure a lower-cost deal before their mortgage comes to an end.

Yesterday’s interest rate rise also spelled misery for homeowners on variable rate deals who have already suffered four rate rises since last summer. Those who took out a £200,000 variable rate deal at 0.05 per cent above base rate last July would have expected to pay £1,117 a month. But after five interest rate rises, they will now pay £1,264 a month.

Adrian Coles, director-general of the Building Societies Association, said: “If people think they are going to have a problem paying their mortgage, they should talk to their building society straight away.”

But brokers gave warning that borrowers tempted to switch to an interest-only deal from a capital repayment mortgage to cut their monthly repayments should do so with caution.

Melanie Bien, of Savills Private Finance, the independent mortgage broker, said: “If you are coming to the end of a fix, consider moving to an interest-only deal for a short period of time. This will reduce your monthly payments as you pay back just the interest and none of the capital. On a £100,000 mortgage at a rate of 5.5 per cent, you would pay £614.09 a month on a repayment basis or £458.33 if you switched to interest-only. However, make sure you switch back to a repayment deal when things become easier otherwise you won't clear your mortgage by the end of the term.”

Borrowers can also cut their monthly repayments by extending the term of the mortgage, but this can be pricier in the long-run. For example, a borrrower who has 20 years to run on a 25 year £100,000 mortgage at 5.5 per cent, can cut his repayments by £73 a month by extending the term by 5 years. But if he fails to shorten the term again, he will pay an additional £19,133 in interest.