Bank of England raises interest rates to 2.25% as economy falters

The Bank of England today unveiled its latest interest rate hike following a delay due to the Queen’s funeral.

In their announcement today, the Bank of England confirmed that interest rates would go up by 0.5%, increasing the base rate from 1.75% to 2.25%. The expected increase comes as inflation remains a key concern for policymakers however some analysts had predicted a more aggressive increase of 0.75% in line with rises by other central banks. 

A number of banks have already increased their interest rates in the past few days, and again today for savers on easy access accounts and others. The increase in the baseline of interest is however putting more pressure on people with mortgage payments, with new mortgages set to be considerably more expensive than just a few months ago for first time buyers.

Following a slump in the British Pound, today’s slightly more conservative interest rate hike comes as the UK prepares to endure a prolonged recession, with house prices already starting to fall, and disappointing retail sales clouding the picture for the economy.

Now, with interest rates at their highest level since 2008, inflation is expected to start cooling, but remains consistently high with the price of food and other basic goods having risen in some cases by more than 20% in the past 12 months. Increasing borrowing costs and a rise in energy prices are also adding pressure on the economy, and could spark a steeper recession in the months ahead.

How have you been affected by today’s rate rise?