Research carried out by think tank the Resolution Foundation claims that 800,000 existing mortgage borrowers could be forced to spend more than half their disposable income on repayments if Bank Base Rate were to rise from its current low of 0.5% to 2% over the next four years, while incomes remain squeezed.

It calculates that the number of households who may struggle to afford their repayments would increase to 1.2 million if Bank Base Rate were to rise to 4% in that time.

Resolution Foundation senior economist Matthew Whittaker said:

“There is now the real prospect that a large number of households already burdened with debt could collapse under its weight if economic conditions tighten.

“Even if interest rates stay in line with expectations, we are likely to see a rise in the number of families struggling with heavy levels of repayment over the coming years.

“But if the squeeze on household incomes continues, Britain could be left in a fragile position, with even moderate additional increases in interest rates leading to a major surge in families with dangerous debt levels – especially among worse-off households.”

Since 2007 the number of households spending at least 50% of their income on repayments has dropped by 270,000 to 600,000 because of falling interest rates.

New Bank of England Governor Mark Carney has indicated that he has no intention of increasing the Bank Base Rate in the near future.