The Bank of England believes homeowners whose fixed-rate mortgages are due to end should be able to cope with higher interest rates when they renew their deals.

And it added that the impact of higher mortgage rates on their disposable incomes after they renew is likely to be "limited", as some consumers will have already adjusted their spending accordingly.

Experts have predicted that as many as two million people will come off fixed-rate deals in the coming months and many will struggle to absorb the higher rates following five interest rate hikes over the last year.

However, in its quarterly inflation report, the Bank said the average interest rate on a fixed-rate mortgage is only 0.75% higher than at the lowest point for the deals in 2005.

The report also said that during 2005, homeowners borrowed nearly £300bn in mortgages, 60% of which were fixed-rate loans of between one and five years.

It added that if two-thirds of people on fixed-rate loans renew this year, annual post-tax household income will only be around 0.1% lower.

But this data is based on the cost of borrowing in June, when rates were 5.5%.

Borrowers have since seen a further quarter-point rise and the report suggests they may face yet another increase, to 6%, possibly before the end of the year.

The Bank claims consumers have taken on increasingly high levels of debt in recent years, with the ratio of household debt to annual income rising by around a half since the beginning of the decade to stand at 160% during the first three months of this year.

It said this increase in debt, together with the recent rises in interest rates, has led to a "significant increase" in the share of people's income which is devoted to servicing debt.

But the Bank's governor Mervyn King said people are not seeing the same unexpected moves in interest rates as they experienced during the 1980s and 1990s.

He said: "We are not seeing changes of that magnitude, but we are seeing rises in the total debt burden."

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