Aspiring first-time buyers have been warned they may need to lower their ambitions as another Bank of England base rate hike adds to mortgage costs.

Thursday’s base rate hike from 3% to 3.5% will add around £49 per month to the average tracker mortgage, according to calculations from trade association UK Finance.

Since December last year, the average tracker mortgage cost has increased by around £333 per month.

Around four-fifths of mortgages are fixed rates, but borrowers on these deals may well get a bill shock when their fixed-rate deal comes to an end.

Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA) said: “For first-time homebuyers, the rate rises are having an immediate impact as the higher cost of a mortgage, alongside the rising cost of living, will affect their overall affordability.

“Those taking their first step onto the housing ladder should therefore seek advice from a lender or mortgage broker, as they may need to lower their ambitions as they’re unlikely to be able to borrow at the level they might have achieved 12 months ago.”

He added: “Whilst we have not yet seen an increase in borrowers with mortgage arrears, we remain alert to the economic conditions, which are rapidly changing.

“It’s worth noting that lenders are sensitive to the rising number of people facing a squeezed household budget and have teams who are well trained and experienced in providing tailored support to those who are struggling.

“Anyone who is worried about their finances and ability to pay their mortgage should therefore get in touch with their lender or a debt adviser as soon as possible.”

Rachel Springall, a finance expert at Moneyfacts.co.uk said: “Moving into 2023, it will be interesting to see how demand for mortgages will be impacted as further base rate rises are expected and house prices are predicted to fall.

“If borrowers are looking to refinance next year, they may want to start building a savings pot to pay for any associated costs and be conscious that mortgage rates are much higher than they might expect.

“First-time buyers may feel disheartened about their chances of finding an affordable property considering the cost-of-living crisis, but when it comes down to applying for a mortgage, it’s always worth seeking advice to go through the options first, particularly if borrowers have a limited 5% deposit.”

Lawrence Bowles, director of research at Savills, said: “We’re likely to see a slowdown in transaction activity from mortgaged buyers over the next few months, with cash buyers gaining a relative advantage.

“However, with the pace of interest rate hikes slowing and the possibility of rate cuts on the horizon, the picture looks like it will improve for mortgaged buyers in 2024 and beyond.”

Simon Gammon, managing partner at Knight Frank Finance, said: “The cost of tracker products will continue to rise and (is) rapidly approaching parity with fixed-rate products.

“Following today’s decision, the best trackers will be in the region of 4%, while the best five-year fixed products are around 4.6%.”

He continued: “Many borrowers will continue to wait on trackers, betting that fixed-rates will fall further, while others will opt to lock in a fixed-rate product to get better visibility on their outgoings during what will be a difficult period from an economic perspective.

“November and December have been particularly quiet in the property market and it’s clear that many borrowers opted to postpone plans in the wake of the mini-budget while conditions settled.

“The likely arrival of five-year fixed-rate products below 4.5% will represent the new normal in the mortgage market and we’d expect more benign conditions to lift activity to some degree.”

Jeremy Leaf, a north London estate agent, said: “Existing sales are proceeding, while new buyers are thin on the ground and deciding on next steps over the holiday period. We expect them to slowly return but negotiate hard, aware that the balance has shifted very quickly their way and they will do their best to take advantage.”

Kevin Brown, savings specialist at Scottish Friendly, said: “The speed at which interest rates have risen this year will have caught many households off guard.

“Millions of working adults have never experienced rates higher than 1% and getting to grips with the impact this has on their borrowing costs will be tough.”

Phil Andrew, chief executive of charity StepChange, said: “We know from our clients’ experience that it’s human nature to try to cope with financial difficulty until debt problems come to a head, but we very much urge anyone experiencing the beginning of any financial pressure as a result of rising interest rates to get help as early as possible, before problem debt becomes entrenched, and when there are more options available to help you.”

Rising interest rates have been feeding through into the savings market in recent months.

Sarah Pennells, consumer finance specialist at Royal London, said: “Interest rates on savings accounts have been rising over the last year.

“The ‘best buy’ easy access accounts now pay as much as 2.9% and NS&I will be increasing its prize fund rate on Premium Bonds in January.

“However, with inflation currently three times this level, people who keep their money in cash – especially over the long-term – will find it loses value.”