Households face higher mortgage repayments after the Bank of England lifted interest rates to 5% – the highest level in five years.

The move by the Bank’s Monetary Policy Committee (MPC) had been widely expected as policymakers look to keep a lid on inflationary pressures.

The quarter of a percentage point increase was as good as sealed by the Halifax after it reported a 1.7% rise in October house prices.

Interest rates are now at their highest point since August 2001 and come amid evidence that more households are folding under the strain of higher overheads, such as council tax bills and energy prices.

A record 27,644 people became insolvent during the summer, fuelling forecasts that more than 100,000 people could go bankrupt or take out individual voluntary arrangements (IVA) in the year as a whole.

The Bank’s decision is likely to cost homeowners with an £80,000 mortgage an extra £13 a month if lenders decide to pass the full cost on to borrowers.

Economists have suggested rates could rise again in February if inflation – currently at 2.4% – continues to exceed its 2% target and the economy is left with little spare capacity.

Vicky Redwood, UK economist at Capital Economics, said: “This move was widely expected, but the key question is whether we see another rise early next year.

“Either way, with interest rates 50 basis points higher than six months ago, it could be a contributing factor to deterring people from entering the housing market over the next few months.”

Ray Boulger, senior technical manager at mortgage broker John Charcol, said: “In terms of the impact on the housing market, this rise coupled with the last rise will reduce the rate of increase in house prices, but will not put them into reverse.”