The increase from 4.85% to 5.35% will push up the cost of a £150,000 repayment-type mortgage by roughly £45 a month, or £540 a year.

The rate hike comes despite the fact that the Bank of England Base Rate has remained at an historic low of 0.5% since last March, and is widely expected to remain at that level when the Bank makes its monthly announcement tomorrow.

The society said its borrowers typically had mortgages on an "annual review" basis and would not see repayments increase until the start of next year, although they will be accruing interest at the new rate from yesterday.

The building society blamed competitive pressures from banks – some of them part-state owned - for the increase in interest rate.

Banks have been offering relatively attractive rates on their savings products in an attempt to get money through the door, as they no longer have recourse to funding via the securitisation markets.

Building societies have found it difficult to compete. Richard Barker, the society's product manager for mortgages, said:

"While in absolute terms savings rates seem to be low, relative to the base rate they are actually quite high.

"Our margins have been crushed – that's really the rationale behind the move."

Barker said N&P itself had also been disproportionately hit by payments to the Financial Services Compensation Scheme to bail out savers in the Icelandic banks.

He said the society had considered raising rates for new customers only, but the low level of lending meant this would not be enough to make a difference.

"This is a change we are making reluctantly, but we are forced to make it for the long-term good of the society," he said.

"We certainly have no plans at all for any further increases."

N&P's rationale is much like the case made by Skipton Building Society, which last month tore up its promise that SVR borrowers would never pay more than 3% above Bank Base Rate.

Skipton increased its rate from 3.5% to 4.95%, saying it could not afford to honour its promise in the current market.

A number of smaller building societies including Kent Reliance and Cambridge have also hiked their SVRs in recent weeks.