Homebuyers are facing their first rise in mortgage rates for a year in a move by banks and building societies that could extinguish the nascent recovery in the housing market.

Nationwide was one of several leading mortgage lenders that today hiked the cost of its most popular deals, with others likely to follow suit in the coming days.

Banks and building societies are increasing the cost of their fixed-rate mortgages, the type of deal that around 80% of homebuyers are opting for at the moment. Nationwide has upped the cost of its fixed-rate deals by up to 0.86%, and state-owned Northern Rock has raised its five-year fixed rates by 0.2%, both with effect from tomorrow. Ray Boulger at mortgage broker John Charcol said most, and possibly all, of the part-nationalised Lloyds Banking Group – which includes Halifax, Bank of Scotland, Lloyds TSB and Cheltenham & Gloucester – were expected to increase their fixed rates this weekend or on Monday, "in some cases by quite large amounts". Yorkshire Building Society has already hiked the cost of its deals, and Principality Building Society also made changes to its range today.

Boulger warned that if rates rise too far, too fast, "it could very easily nip the recovery in the housing market in the bud".

Britain's banks are raising mortgage costs after an increase in their own funding driven by government bond yields. As investors have become more optimistic about the health of the UK economy, they have begun to fret about the return of inflation. That has prompted them to sell government bonds, known as gilts, whose long-term value is eroded by high inflation. When the price of gilts falls, their yield – the interest rate the government must pay to borrow – goes up. Today the yield on 10-year gilts hit a seven-month high of 4.01%. Since many other interest rates across the economy are set with reference to gilt yields, this increase is feeding through to borrowing costs for ordinary families and businesses.

Fears of inflation are rising, because:

• Oil prices have more than doubled, hitting an eight-month high of $72 a barrel yesterday;

• Manufacturing output in the UK increased in April, prompting predictions that the recession is coming to an end;

• There are fears the Bank of England's £125bn quantitative easing policy could feed through into rising prices if consumer demand recovers rapidly.

The news that mortgage costs are rising came as the Bank of England announced that up to 1.1 million households have been plunged into negative equity by the property crash. With prices down by 20% from their peak in autumn 2007, research by the Bank published tomorrow suggests that between 700,000 and 1.1 million homeowners now owe more on their mortgage than their house is worth.

The Bank's nine-member monetary policy committee will be alarmed at the rise in mortgage costs. After slashing interest rates to just 0.5%, their lowest level ever, they embarked on the drastic policy of quantitative easing – buying up billions of pounds worth of government bonds – to bring down borrowing costs and boost lending to cash-strapped families and businesses.

There are growing signs that the housing market is experiencing a spring bounce. Figures issued by the Council of Mortgage Lenders today showed a 16% jump in mortgage lending to people buying a home during April.

Darren Cook, a spokesman for the financial data firm Moneyfacts, said the price of two-year fixed-rate mortgages had been falling for 12 months, until now. "The last time mortgage lenders were stumbling over each other trying to increase their fixed-rate mortgages was back in June 2008. At that time, inflation was nearly hitting 4%," he added.

David Hollingworth at mortgage broker London & Country said a "tipping point" had been reached. "You have to remember that mortgage rates have been at all-time lows, and at the end of such a period there always comes a tipping point. It looks as though we're now there, and all the signs suggest fixed-rate mortgage rates are only heading one way – upwards. The fear is that once interest rates start rising, they will go up quite rapidly. When a few lenders start raising rates, the rest of the market are quick to follow."