The rising cost of borrowing and interest rates.

If you’re taking solace in low interest rates, you better think again. Homebuyers have seen their first mortgage rate rise this year. Nationwide has upped the cost of its fixed-rate deals by up to 0.86%, and state-owned Northern Rock has raised its five-year fixed rates by 0.2%.

Ray Boulger at mortgage broker says most, and possibly all, of the part-nationalised Lloyds Banking Group – which includes Halifax, Bank of Scotland, Lloyds TSB and Cheltenham & Gloucester – will increase their fixed rates, “in some cases by quite large amounts”.

“Any material rise in government funding costs will have a knock-on effect on secured borrowing, putting significant pressure on households,” says RBC Capital Markets’ John Wraith. “This could have a serious impact on any UK economic recovery.”