The Bank of England has increased the base interest rate by 0.25% to 1%, a move that could have far-reaching consequences for UK mortgage holders and savers.
In a surprise decision, the Monetary Policy Committee (MPC) voted in favour of the increase, citing rising inflation and concerns over the economy's growth prospects.
Mortgage experts warn that this rate hike will lead to higher borrowing costs for homeowners, potentially pricing some out of the market. The average two-year fixed-rate mortgage has already risen by 0.2% to 1.93%, according to data from Moneyfacts.
The increased cost of borrowing is likely to be felt across the economy, with consumer spending expected to slow as households face higher interest rates on their debt. This could have a knock-on effect on economic growth, which may be impacted by reduced consumer confidence and lower business investment.
The Bank's decision has also sparked concerns for savers, who will see returns on their deposits fall in line with the new base rate. This could result in reduced income for those reliant on savings to supplement their pension or cover living expenses.