THE UK is set to fall into its longest recession since the financial crisis and inflation will peak at more than 13% as gas prices soar, the Bank of England has warned.

Decision makers hiked the Bank’s base interest rate to 1.75% from 1.25%, the biggest single rise since 1995, as they tried to control the runaway inflation.

Inflation will mean your money is worth less than it was a year ago as prices increase while a rise in interest rates will have a big impact on the housing market and people's savings.

The 0.5% increase is leading to dire warnings for first-time buyers in the UK.

READ MORE: UK economy to fall into recession, predicts Bank of England as interest rates hiked

So, if you're looking to move out of the private rented sector and buy your first home, what will this drastic rise in interest rates mean for you?

What will the rise in interest rates mean for first-time buyers?

It's yet more bad news for first-time buyers in the UK.

House prices were already surging prior to the Bank of England’s announcement, with Nationwide saying the UK’s annual rate of property price growth had reached 11% to a whopping £271,209 in July.

In Scotland, that figure is £181,422.

The interest rate rise will be a double blow to new homeowners as it will make their monthly mortgage payments even more expensive.

READ MORE: Cost-of-living: Interest rates rise as inflation set to hit 13 per cent in October

Property website Rightmove said surging house prices and evermore expensive mortgage deals means the average monthly home loan payment for a first-time buyer in the UK currently stands at £976 – 20% higher than the figure for January at £813.

But now, with the 0.5% interest rise, first-time buyers face an average monthly payment of £1030.

For the average first-time homeowner, this will mean mortgage payments will make up a whopping 40% of their gross salary.

There are dire warnings for people in the UK looking to buy their first home

That's the worst level seen for at least a decade, Rightmove said.

But the eye-watering price of mortgage payments will only happen to those who can afford a deposit in the first place.

It's getting much harder to buy a house in the UK with a 10% deposit now standing at an average of £22,494 - 57% higher than a decade before when the average deposit was £14,316.

The average UK house price stands at £224,943.

In Scotland, the average price for a house is £181,000.

What if I already have a mortgage?

For most people in the UK that are on fixed-priced mortgages, they are currently insulated from the interest rate rise.

However, millions of households around the UK are not and could face a steep rise in their monthly repayments.

Around 21% of borrowers are on a variable rate mortgage, according to banking body UK Finance.

There are dire warnings for people in the UK looking to buy their first homeMonthly mortgage payments are set to increase for millions across the UK

This includes tracker mortgages, where the rate paid is linked to the Bank base rate or one based on their lender's standard variable rate (SVR).

About 1.1 million people are on SVR deals while a further 800,000 are on tracker mortgages.

READ MORE: What happens to house prices in a recession?

For those on a tracker mortgage, they should expect to see the rise in interest rates passed on to them. The fine print of their mortgage agreement will them know how fast they can expect to pay this increase.

For a tracker mortgage on 2.5%, this would go up to 3% meaning an extra £38 a month on a £150,000 mortgage with 20 years left.

It's trickier for those on SVRs as changes in mortgage payments are at the lender's discretion.

But most people on these deals should expect their payments to rise too.

What is a recession?

A recession is a significant, widespread and prolonged downturn in economic activity. 

A general rule is that two consecutive quarters of decline in a country’s Gross Domestic Product (GDP) results in a recession. 

An economic downturn can have a negative impact on the value of houses but this is not a blanket statement that can be applied to every property. 

There are dire warnings for people in the UK looking to buy their first home

During a recession, it's possible to see an increase in the rates of foreclosure, flat or declining property values and houses staying on the market for longer before they are sold. 

The key thing when it comes to either buying or selling houses is that the property market will carry on regardless whether you decide to enter it or not, so it’s really a case of considering your own personal circumstances and figuring out what is best for you.