According to the Confederation of British Industry’s (CBI’s) latest economic forecast, interest rates will have to rise in the New Year to ‘control inflation’, the Daily Mail reports.

This, as the paper states, will lead to many families facing an increase of more than £200 a month in their mortgage payments – adding thousands to their annual mortgage costs.

The CBI has said that interest rate rises would come in the New Year despite slow economic growth as ‘tax rises and Government spending cuts bite’.

Rates, which are currently at the record-low 0.5%, will reach 1.25% by the end of next year and 2.75% by the end of 2012, the group believes.

Ray Boulger, of mortgage adviser John Charcol, commented: “Those who will be hardest hit are those whose finances are already on a knife-edge because they have either lost their job, suffered a loss of income or borrowed too much.

“Most people will be able to cope but they should think about paying back other debts and cutting their spending to prepare for rates going up.”

A spokesperson for the IVA Forum added: “As Mr. Boulger has said, repaying other debts and reducing spending could be a good way to prepare for interest rate rises.

“We would advise anyone who is already struggling with their finances, though, to seek professional advice without delay – before the expected rises take place.”