Last week, the Bank of England raised base interest rates by 0.5 percentage points to 2.25% –pushing borrowing costs to their highest level since 2008.

Base interest rates are forecast to continue edging upwards and reach 3% by year-end and 4.25% by August 2023, a trajectory that would translate into mortgage interest rates of at least 5.5%.

Economists maintain that a policy of gradually increasing interest rates remains the most potent weapon for tackling runaway inflation and, as Bank of England projections suggest that CPI inflation will hit 13.3% by November, we should get used to higher borrowing costs.

Soaring inflation has a particularly harmful impact on those living on fixed incomes, an unenviable position many folks on the cusp of retirement can easily envisage. A sizeable number of people who may have recently retired are experiencing their first bitter taste of the damage inflation can inflict upon their finances.

Retiring with large, expensive debts is often considered a mistake because every penny of debt you must repay reduces your retirement income. However, it’s also true that while clearing all of your debts in one fell swoop may bring a huge sense of relief, if such action decimates your pension pot, you’re unlikely to enjoy a worry-free retirement. It follows that prioritising the types of debt you need to reduce before taking action to tackle it makes enormous sense.

Ideally, retirees would have paid off their debt years before clocking off work for the final time. But in reality, many are left with a chunky residual balance on their mortgage, plus perhaps an outstanding car loan and a handful of credit card debts. As interest rates continue their upward momentum, paying down expensive debt is a priority for those planning to retire soon.

Credit card interest rates currently hover around 20% which means borrowers are paying £1 for every £5 they’ve borrowed. Paying interest rates this high would have a noticeable impact upon your finances at any point, let alone when you’re planning to retire.

Similarly, following a comparatively recent explosion in the means by which a new car may be financed (personal contract hire; personal contract purchase; personal loan; hire purchase; balloon hire purchase, etc.), checking the level of interest you’re currently paying and considering whether you need a large car in retirement could save a small fortune.

Paying off a mortgage prior to retirement is a common and understandable aim amongst soon-to-be retirees. People who have achieved this (and it is an achievement) note how much more relaxed they feel: some maintain it has improved their quality of life – an observation that should not be ignored but afforded due consideration in any decision to finally ditch the mortgage.

“Debt consolidation, whereby all of an individual’s debts including loans, credit cards, mortgage and overdrafts are merged into a single loan can be a sensible strategy for people on the cusp of retirement,” notes Mark Gregory, chief executive of Equity Release Supermarket.

“Furthermore, people aged 55 and above who own their own home may be able to release funds from their property with which to repay all of their outstanding debt,” adds Mr Gregory.

For many, the widening appeal of equity release is attributable to one particularly attractive feature: older homeowners can release a proportion of their property’s value in tax-free funds without having to make regular repayments if they choose. The most popular form of equity release uses a ‘lifetime mortgage’ to withdraw funds from the home. Interest is added to the mortgage, with the total paid off either when you die or go into long-term residential care.

Earlier this year, Equity Release Supermarket launched smartER, a unique search engine which matches real-time equity release deals with user’s requirements. The platform is completely free to use and no credit checks are required.

“smartER has been an enormous success,” says Mark Gregory, “and it’s perhaps notable that one of the most popular applications for products such as lifetime mortgages is debt consolidation.

“It’s very easy to use: simply input your details, click on your plan requirements and smartER will search the whole of the market in real-time and show you a range of options based on your personal circumstances.

“A shortlist will detail every plan and show exactly how much you could borrow. You may also refine your results by using a range of filters.”

As interest rates drift upwards in an attempt to curtail inflation, older homeowners with outstanding borrowings may consider checking out smartER an especially clever move.

For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.

This column is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.