The Bank of England has raised the interest rate for only the second time in a decade.
The rate has risen by a quarter of a percentage point, from 0.5% to 0.75% – the highest level since March 2009.
While the decision means that the 3.5 million people with variable or tracker mortgages will pay more, the rise will be welcomed by savers.
- On a £150,000 variable mortgage, a rise to 0.75% is likely to increase the annual cost by £224
- A Bank rate rise does not guarantee the equivalent increase in interest paid to savers. Half did not move after the last rate rise
- No easy access savings account at a major High Street bank pays interest of more than 5%
What happens next?
The Bank is sticking to its guidance that interest rates will continue to head higher, but only at gradual pace and to a limited extent.
The financial markets have taken this on board and are forecasting one, and perhaps two, rises of 0.25% before 2020.