The current mortgage market could mean economic ruin for many families - Bill Carmichael

This indeed stimulates demand, and prices begin to rise rapidly.

But our young family seize probably the only opportunity they will ever have to own their own home, and they mortgage themselves to the hilt to buy a house on a 2 per cent two-year fixed rate deal, completing the purchase just before the stamp duty holiday ends in June 2021.

That is the good news; now for the bad; This summer their fixed rate mortgage deal comes to an end and they are re-entering the mortgage market at precisely the worst possible time.

The wider picture is that inflation remains stubbornly high in the UK, and market analysts are convinced that the Bank of England will increase interest rates in the near future to try to bring it down.

Indeed, the Chancellor, Jeremy Hunt, issued an explicit warning this week that the UK has “no alternative” other than to increase interest rates to tackle rising prices, adding that it was the “number one challenge” we face.

As a result the yield on British government gilts in the international money markets have rocketed to a level that has even surpassed the rates seen after the controversial mini budget introduced by Liz Truss’s ill-fated government last September.

This may all seem a bit technical, but basically money is going to become much more expensive to borrow, and this has real-world consequences.

It means for example, that the cost of government borrowing is likely to soar, putting increasing pressures on public services, such as the NHS.

But for our young family - and sadly millions like them - it could spell complete economic ruin.

Families coming off two-year fixed rates this summer have absolutely no chance of matching the 2 per cent deals they managed to get in 2021.

For example, HSBC caused near panic in the mortgage market by pulling all its mortgage deals for new customers late last week, and other big lenders are following suit, with brokers describing the market as being in “a state of frenzy”.

The cheaper mortgage deals are being withdrawn hand over fist, and replaced with much more expensive versions.

Our young family is probably looking at rates approaching 5 per cent, which will have a big impact on their finances. I have heard of families facing an increase in mortgage costs of over £700 per month, and in addition to other cost of living problems, such as high fuel bills and increasing grocery costs, this could push some people over the edge.

I count myself incredibly fortunate that, with my mortgage almost paid off and my children living independent lives, the current volatility in the market won’t impact me too badly.

But I sympathise with that young family, because I have been there myself and got the T-shirt. A quarter of a century ago, when my children were young, and we were existing on a single provincial journalist’s salary, we were hit by big interest rises.

In the late 1990s mortgage rates were even higher than today, approaching an eye-watering 9 per cent, and I well remember spending sleepless nights worrying if I was going to be able to keep a roof over my children’s heads. We got through it - just about.

This crisis in the mortgage industry has been described as a “ticking time bomb” as more people come off cheap fixed rate deals and are hit by massive increases in costs.

Even if they do survive, they will have far less money to spend, and this could well trip the UK economy into recession next year.

And here is something that should give Rishi Sunak pause for thought with a General Election on the horizon (it has to happen before January 2025).

Back in 1989, after interest rates were jacked up to high levels, the then Conservative Prime Minister, John Major, told the country: “If it isn’t hurting, it isn’t working.”

Well, it did hurt, but eventually it did work and inflation was tamed. But after Labour won the 1997 general election, it was Tony Blair’s government that reaped the benefits.