Mortgage rates could rise dramatically if Britain loses its prized AAA credit rating, experts are warning.

Last week, UK government debt was put on "negative outlook" by the credit ratings agency Moody's, giving it a 30 per cent chance of a downgrade within the next 18 months. Such a downgrade could not only hit Britain's prestige, but also the pockets of millions of mortgage holders.

The UK's major high street lenders have made it almost impossible for thousands of homeowners on interest-only mortgages to move home. The new, stricter rules on lending criteria, also mean very few new borrowers will qualify for an interest-only product.

Both Lloyds and Santander have now introduced strict new rules for interest-only mortgages. Will other lenders follow suit?

In the last week Santander and now Lloyds have introduced a number of strict new rules for interest-only mortgages, seriously restricting who is eligible to get one.

We explain exactly what has happened and why.

The average price of a two-year fixed-rate mortgage has reached its highest level since August at 4.27 per cent.

Data from Moneyfacts.co.uk shows the average price of two-year fixed rates fell from 4.27 per cent in August to a low of 4.16 per cent in September before increasing to 4.22 per cent in October. Prices remained at 4.22 per cent in November before edging up to 4.24 per cent in December.