Homeowners could be hit by higher mortgage rates because of turmoil in the credit markets. The price of shorter-term borrowing has soared in recent weeks, and experts say that borrowers may have to foot the bill.

Melanie Bien, of Savills Private Finance, the mortgage broker, said: “The two-year swap rates, which usually determines the cost of fixed-rate home loans were relatively low at 6.18 per cent yesterday. But the 3-month Libor rate which lenders must pay to borrow money in the short-term was much higher at 6.8 per cent. If this high rate continues it is only a matter of time before lenders start passing on the cost to borrowers. Some lenders may resist the urge for longer, in an effort to grab a bigger market share, but ultimately, if the cost of short-term borrowing doesn’t fall, mortgage repayments will rise.”

This will come as a blow to borrowers who have already had to shoulder five base rate rises since last August. Recent figures from Nationwide show that around 250,000 homeowners will face a repayment hike before Christmas as they come to the end of fixed-rate mortgage deals.

But the credit turmoil spells good news for savers. They are cashing in as rising swap rates and a pressing need by some banks and building societies to raise cash has sparked fierce competition in the savings market.

Laiki Bank yesterday became the latest savings institution to join the battle of the bonds, raising the rate on its one year savings account by 0.3 percentage points to 6.65 per cent. Earlier in the week, West Bromwich Building Society introduced a one year e-bond offering 6.86 per cent, and Derbyshire Building Society increased the rate on its one-year bond by 0.55 percentage points to 6.85 per cent. Northern Rock also increased the rate on its one-year bond to 6.71 per cent, up from 6.40 per cent. These rates are far higher than swap rates, the money markets which determine fixed-rate pricing. The one year swap rate hit 6.59 per cent yesterday. One industry insider said: “Paying those rates will definitely be costing these institutions money.”

Andrew Hagger, of Moneyfacts, the financial information website, said: “Whilst the turmoil in the money markets is making life tough for lenders and specifically sub prime mortgage customers, on the flipside savers are now seeing some of the highest rates we've witnessed for almost six and a half years.

“It's uncertain when this situation will calm down, but one year fixed rate deals in excess of 6.8 per cent are undoubtedly going to to prove popular and may not be around for very long.

“The fact that rates have been increased by such large margin does seem to indicate a sense of urgency to get this money through the door.”

Northern Rock admitted that it was offering a high rate on its one-year bond in an effort to raise extra funds. The bank has been hit hard in recent weeks as it it raises most of its funding from the credit markets.

Ron Stout, of Northern Rock, said: “We are pitching our funds at a good, competitive price and we are continuing to raise money.” West Bromwich said its move had not been prompted by the credit crunch and that it had planned to launch a high-paying bond for weeks.

Jason Witcombe, of Evolve Financial Planning, the independent financial adviser, said: “Savers should make the most of these high rates if they have less than £35,000 to invest. But those with more than this at their disposal should be circumspect about the financial strength of the companies in which they are investing and should not put all their eggs in one basket.”

Savers who have their money in lower-paying accounts could still benefit from the bond-rate tussle at the top as other savings institutions increased their rates in an effort to stop money flowing out of their coffers.