Britons are bracing for yet more hip-pocket pain and the pound has plummeted to record lows as the fallout continues from the Conservative government’s so-called ‘mini-budget’.

The Bank of England said early on Tuesday (Australian time) it was monitoring the falling currency value and would not hesitate to again hike interest rates.

Economists explained it was all in response to growing market volatility as a result of the Truss government’s surprise policy announcement that, though labelled “mini”, was one of the biggest splurges in their living memory.

“The economy is already on fire and this feels like pouring kerosene on top of it,” AJ Bell senior analyst Tom Selby told The New Daily.

The policies included the biggest tax cuts in over 50 years, a savings of most benefit to the country’s richest people. Stamp duty for some home purchases has also been cut.

British Chancellor Kwasi Kwarteng has doubled down on the raft of policies – saying they were just the beginning – despite political backlash and negative reaction from investors.

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The fallout casts doubt on new Prime Minister Liz Truss’ popularity – especially now that mortgages could rise as a result of her government’s moves.

“Serious questions are already being asked about the economic competency of the new government,” senior analyst at Oanda, Craig Erlam, told CNN.

“So much so that markets are factoring in a strong chance of a substantial emergency rate hike from the Bank of England in order to shore up the currency and confidence in the markets.”

Paying hundreds of extra pounds on a loan would be devastating for many homeowners amid global uncertainty including from the war in Ukraine, soaring food prices and the energy crisis going into winter (though they have been promised a cap on bills).

But the central bank would be motivated to hike rates to curb further damage caused by inflation.

• Read more: Turbulence and terror for investors – what next? 

Prices are already rising the fastest they have in 40 years in Britain. And things are about to cost even more.

On Monday, the pound was nearing equal to the US dollar, falling to $1.03 before slightly recovering to close at $1.07.

As the value falls, food and goods will become more expensive to import. Bad news considering Britain imports more than half of its food products including hops for beer.

British tourists planning to get away will find their cash isn’t worth as much when they are travelling overseas.

On the upside for Australians, a trip to Britain would become more affordable as a result of the pound’s plummeting value.

Happy tourists won’t do much to cheer up locals struggling to put food on the table, fill up the car or heat up their homes.

Winter is coming – and a falling pound will make oil and gas even more expensive.