Markets are now convinced that the Bank of England will increase base rates for the 13th time in a row tomorrow, the only question is by how much. After this morning’s disastrous inflation figure, there is a growing feeling that it could hike bank rate by 0.5 per cent, taking it to five percent.

Today's consumer price inflation headline rate of 8.7 percent was higher than the expected 8.4 percent, exactly the same as in April.

Yet that wasn't the worst of it.

Core inflation, which cuts out more volatile items like food and fuel, actually climbed to 7.1 percent.

Inflation just isn’t giving up.

The average two-year residential fixed-rate mortgage already charges more than six percent, Moneyfacts said, and that could soon hit 6.5 percent.

One million homeowners whose fixed deals expire in the second half of this year face an average rise in annual repayments of £5,304, Oxford Economics has warned.

That’s equivalent to an extra £442 a month, on top of rising tax bills and general living costs, and many simply can't afford to pay more.

As they desperately hunt for ways to cut costs, cash-strapped homeowners will be tempted to slash the amount they pay into pensions and Isa savings.

Experts are urging them to resist if they can. Otherwise they risk inflicting long-term damage to their finances and ruining their retirement plans.

It won’t be easy, though.

Today's mortgage crunch will make it even harder to clear debt and build savings in time for retirement.

More than 1.5million Britons already work past age 65 to make ends meet, up a fifth in the last five years and expected to climb even higher.

The rising state pension age will make matters worse, as it starts climbing to 67 from 2026, and thereafter to 68 and beyond.

Anybody who wishes to retire before then needs to build enough pension and Isa savings to plug the gap, while clearing debts if they possibly can.

The sudden ratcheting up of mortgage costs and rental payments is bound to have a disruptive effect on retirement savings, said Gary Smith, partner in financial planning at wealth manager Evelyn Partners. "Just as the cost-of-living crisis is eating into retirement savings, the cost-of-borrowing crisis will hit those with outstanding debts.”

This could impact everyone from first-time buyers who cut back on pension saving to get on the housing ladder, to the middle-aged who find themselves taking on marathon mortgages that run well past state pension age.

Those nearing retirement age may also see their plans destroyed, as they struggle to pay off the mortgage at today's higher rates, Smith added.

Some homeowners are responding to the crunch by extending their mortgage term to 30 or 40 years.

This offers short-term rellief but it means the debt takes longer to pay down while total interest payments will roll up and ultimately cost a lot more.

Many may also find that they cannot pay off the debt before they retire, Smith said. “Savers will be tempted to use their 25 percent tax-free pension lump sum to pay down their mortgage. This is by no means an unusual strategy but it leaves less savings for retirement.”

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Smith is worried that many might opt out of their workplace auto-enrolment pension schemes, to save the four percent of salary they have to contribute.

However, by doing so, they will miss out on their employer's three percent contribution, and a further one percent tax relief.

Effectively, they're turning down free money.

Despite that, one in six workers have already cut pension contributions and that could rise past one in four, according to consultancy LCP.

Smith urged those affected to carry on saving if they possibly can, and find other things to cut.

Those who do have some cash floating around could use it to pay down some of their mortgage equity, said Emma-Lou Montgomery, associate director for personal investing at Fidelity International.

“Most lenders allow you to repay 10 percent of the capital every year without penalty. Doing so could cut your mortgage balance and possibly give you a better choice of rates at lower loan-to-values when you remortgage.”

Amanda Aumonier, head of mortgage operations at Better.co.uk, suggested talking to a broker to source a competitive deal as your mortgage gets close to maturity.

If struggling today, talk to your lender. “Options may include payment breaks, extended repayment periods, interest-only or switching to a more affordable home loan. Otherwise, look to increase your income if you can.”

Slashing pension contributions should be a last resort. Unfortunately, growing numbers may be driven to do it anyway.