The average mortgage rate at the beginning of October was almost 6%, NimbleFins previously reported, up from about 2.34% in December.
The Bank of England has increased the base rate seven times since December, raising it from 0.25% to 2.25%, with mortgage rates following in response.
And with inflation still set to be sky-high for some time, rates are likely to continue rising.
Chris Hare, a senior economist at HSBC, said: “We are increasingly concerned about the possibility of spiralling mortgage costs leading to a wave of forced sales, triggering a broader, deeper, and more prolonged slump.”
The bank based its estimates on predictions the Bank of England will raise interest rates to 4.25%. But some forecasters predict interest rates could hit 5.75%, meaning the impact could be even worse. Mortgage rates hit 7%, some say.
Every 1% rise in mortgage rates is estimated to add £1,500 to repayments for the average loan, the Telegraph reported.
Those on tracker mortgages or standard variable rates, plus first time buyers are already being hit with the higher borrowing costs. But with millions on two and five year fixed rate deals, the problem is likely to drag out for some time as borrowers suddenly see their repayments soar when they come to remortgage.
Graham Cox, director of Bristol-based Self Employed Mortgage Hub, said: "Unless we are very lucky and inflation falls much more quickly than predicted, I don't see any other outcome than a sizeable fall in house prices, possibly 20% or more over the next two to three years.
"A lack of housing supply won't help one iota when mortgage rates are somewhere between 5% and 7%, as is likely over the coming months. First-time buyers won't be able to borrow as much, therefore they won't be able to offer as much. It's as simple as that.
“With rates on the rise, the decade-long property bubble is about to burst. The worm has turned. It's a buyer's market now."
In a more modest forecast, HSBC predicts house prices will fall 3% in 2023 and 1% in 2024, the Daily Express reported.
The pound plummeted against the dollar at the end of last month as the markets were spooked by the Government's tax-cutting mini-budget.
This saw hundreds of mortgage deals taken off the market, according to Moneyfacts.
Robert Payne, director of Bristol-based Langley House Mortgages: "The property market is known for its resilience but right now there is a very good chance we could see house prices drop, given how quickly and how dramatically things have changed in recent weeks. If prices do drop, the first owners to be impacted will be those that borrowed with a 5% deposit and they run a real risk of slipping into negative equity, causing high risk for lenders. It would be reasonable to assume that we will see 95% deals disappear from the market as lenders protect themselves in adverse conditions and wait for market adjustments to take place.”
However, Lewis Shaw, founder of Mansfield-based Shaw Financial Services, was more optimistic, He said: "We must remember we have a chronic housing shortage, and mortgage lenders want to lend. Those two things together are the opposite of what would predict a crash. Lenders are withdrawing rates because they don't know how to price them accurately, not because they don't want to lend. Will prices fall? Possibly. Will we see a crash? For all our sakes, let's hope not."
More recently, the OBR predicted house prices would drop for two years before starting to rise again. Read more here.