Two-thirds of the £12bn eventual rise in UK mortgage costs from higher interest rates has yet to be passed on to borrowers, leaving them facing painful refinancing over the coming months, a think-tank has warned.

The Bank of England this week lifted its main interest rate by a quarter of a percentage point to 4.5 per cent, the 12th consecutive rise since December 2021. The increase will lead to higher bills for people on floating mortgage rates and heighten remortgage fears among those nearing the end of a fixed-rate deal.

In a report published on Saturday, the Resolution Foundation said about half of the 7.5mn mortgaged households facing revised interest rates between the fourth quarter of 2021 and the end of 2026 had yet to see a change in their mortgage rate.

The think-tank estimated the £12bn increase in mortgage costs over the same period by taking market expectations of interest rate changes over the next four years, as well as repayment rises since 2021, and calculating the impact on variable rate and fixed-rate mortgages.

It found £9bn of the increase would be borne by the richest 40 per cent of households, who are more likely to live in expensive homes and hold mortgages. But it also warned that lower-income households and first-time buyers would feel greater pressure on their living standards, since mortgage costs are much higher as a proportion of their income.

Simon Pittaway, senior economist at the Resolution Foundation, said: “People moving on to new fixed-rate deals over the next year can expect to see their annual mortgage costs rise by an eye-watering £2,300 — with young families and low- and middle-income households with mortgages facing the biggest living standards hits.”

The BoE has estimated that roughly 1.3mn households will need to refix between April and December 2023.

“For the average mortgagor within that group, monthly interest payments will increase by around £200 a month if their mortgage rate rises by 300 basis points — the increase implied by quoted mortgage rates,” the central bank said in its latest monetary policy report.

Borrowers who value the certainty of knowing their future monthly payments may select a two-year fix or a cheaper five-year deal, brokers said. But consumers who believe interest rates will fall within the next two years may spurn a fix in favour of a tracker mortgage, linked to the BoE base rate, that allows them to fix later should better deals emerge.

Simon Gammon, managing partner at broker Knight Frank Finance, said that was “a highly personal decision” because it came “with the risk that your monthly payments will rise if the BoE opts to raise interest rates further”.

For the 8 per cent of borrowers on tracker mortgages, Thursday’s interest rate rise means an average £24 increase in monthly payments, but a £417 monthly jump when the rises from 2021 are included, according to data from industry body UK Finance, based on average mortgage sizes.

Meanwhile, the 9 per cent of borrowers on a standard variable rate — the most expensive offered by lenders — will see an average £15 rise in their monthly payments, but a £267 monthly increase with previous rate increases included.

Mortgage brokers played down the prospect of borrowers being forced on to SVRs, pointing to the rise in product transfer mortgages, where a lender offers a new deal as the customer’s fix expires without having to reassess affordability.

Ray Boulger, analyst at broker John Charcol, said that even if people’s circumstances had changed “they can still get a product transfer in nearly every case . . . So if people are on SVR, it’s normally through choice or probably through inertia.”