The Office for National Statistics (ONS) said on Tuesday that in the year to December the consumer prices index (CPI) rose to 2.9%, up from 1.9% in November.

“The increase in the CPI annual rate of 1.0% from 1.9% in November to 2.9% in December is the largest ever increase in the annual rate between two months,” said the ONS.

However, the record increase followed a number of exceptional events that took place in December 2008, said the ONS. This included the reduction in VAT to 15%, sharp falls in oil prices, and pre-Christmas sales.

“These exceptional events led to the CPI falling by 0.4% between November and December 2008 (a record fall between these two months),” said the ONS.

However, the speed of the increase is worrying.

“The speed of the increase is something that will be worrying the Bank of England as it creeps higher. I think that we will see a vote for an interest rate increase from some of the more hawkish members of the MPC in the next two months, with rates actually rising in Q3,” said Jeremy Cook, chief economist of foreign exchange broker, World First.

For borrowers, and especially those with variable-rate mortgages, it will mean higher repayments.

"Today's inflation figures will bring to an end the 'rate complacency' we have seen among borrowers over the past year or so. This is a real shot across the bows for borrowers, many of whom are quietly banking on a low interest rate environment in the short term,” said Andrew Montlake, director, independent mortgage broker, Coreco.

If rates rise, many people with variable-rates mortgages will be hit.

"If rates rise to contain inflation then many borrowers will find themselves with significantly higher monthly payments,” said Montlake