The Bank of England has hiked interest rates to 5% adding further strain to millions of homeowners across the country.
The central bank's base rate was upped by 0.5 percentage points from 4.5% and remains at its highest level since the 2008 financial crash. It is also the largest single rise since February this year.
It is the thirteenth time the base rate has been raised in a bid to lower inflation - which yesterday was confirmed as 8.7%.
Experts had widely predicted the Bank would hike rates again after the May inflation figure remained the same as was recorded in April.
It does also solidify the possibility that the base rate could increase to 6% at some point this year.
The move will mean that millions of variable mortgages and borrowing are to - once again - get more expensive.
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The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the base interest rate by 0.5 percentage points.
Andrew Bailey, the Governor of the Bank of England said the decision to raise rates was because "further action" was needed to tackle inflation.
He said: "The economy is doing better than expected, but inflation is still too high and we’ve got to deal with it.
"We know this is hard - many people with mortgages or loans will be understandably worried about what this means for them. But if we don't raise rates now, it could be worse later.
"We are committed to returning inflation to the 2% target and will make the decisions necessary to achieve that."
One of the reasons for the rise was that wages and "domestic prices" were growing faster than had been predicted in May and would "likely take longer to unwind than they did to emerge”.
The Bank says it will continue to monitor inflation and further rate increases will be required if inflation continues to be higher than expected.
Commenting on the interest rate decision today, Chancellor Jeremy Hunt said: “High inflation is a destabilising force eating into pay cheques and slowing growth. Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.
“Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don’t act now, it will be worse later”.
Alice Haine, personal finance analyst at Bestinvest said the rate was "not a major surprise" after Wednesday's inflation announcement and the most significant part of this was the size of the rise.
She noted that this move shows that the Bank of England is taking a "more aggressive stance" on tackling inflation "despite" the effect it could have on mortgage borrowers.
She said: "Let’s hope this is not a case of unlucky number 13 with the move likely to exacerbate the panic already gripping Britain’s mortgage market.
"Britain’s inflation problem is proving increasingly difficult to curb, with CPI inflation stuck at 8.7% for two months in a row and core inflation, which strips out the more volatile items such as food and energy, rising sharply to 7.1% - the highest reading in 31 years.
"The question now is how far the Bank is willing to go in its bid to bring inflation closer to its target of 2%? Interest rates are now at their highest level since April 2008 with financial market expectations that they will peak at 6% by the end of the year meaning further rate rises are in the pipeline.
"Although inflation is on track to fall rapidly in the second half of the year, as energy prices continue to decline and food inflation eases back slowly, the fear is that interest rate rises may not be enough to tame persistently high inflation."
How will the interest rate rise affect my mortgage?
The move is another blow to people with mortgages as the cost of their homes will increase even more.
"Tracker" mortgages move in line with the base rate, so these become more expensive when the base rate goes up.
Standard variable rate (SVR) mortgages normally go up too - but it is down to your lender to pass on any rises.
You are usually placed on an SVR deal after your fix or tracker rate ends.
More than 1.4million mortgage holders have a tracker that moves in line with the base rate or a standard variable rate (SVR) deal.
Currently, eight out of ten mortgage holders are on a fixed-rate deal, if this is you, your rate won't change while you're still in your current deal
However, you are more likely to pay more when you come to remortgage due to how much rates have risen over the 18 months.
According to data compiled by Moneyfacts.co.uk, as of this morning, there were 4,507 residential mortgage products available on the market.
The average two year fixed residential mortgage rate today is 6.19%, which is up from an average rate of 6.15% yesterday and the average five year fixed residential mortgage rate is 5.82% - up from 5.79%.
The surprise hike of 0.5% means those on a typical tracker mortgage could be paying around £47 more a month extra on their mortgage and those on standard variable rate mortgages may face a £30 jump.
How does the interest rate rise affect credit cards and other borrowing?
Credit card interest rates are normally variable anyway, so will change from time to time.
However, in recent years, some lenders have started to link their credit card rates to the base rate.
You should get 30 days’ notice if your interest rate is going up so you may not feel the impact immediately - if you are concerned you should check with your lender.
Interest rates on most personal loans and car financing are normally fixed so most of the time you will not be immediately hit by the rate rise.
But again - do check with your lender to be sure.
How does the interest rate affect my savings?
On a more positive note, the interest rate hike does mean that the rate on savings should go up.
However, banks have been slow at passing on higher savings rates to customers and they still remain relatively low.
Earlier this month, MPs in the Treasury Select Committee called on banks to "up their game" when passing on the rates.
Since this, rates offered by banks have been on the rise.
The best easy-access rate right now is currently 4.1% from app-only Tandem - although the underlying rate is actually 3.75% with a "top-up" of 0.35% which you have to manually click to get when you open the account.
Fixed accounts pay more but the rate you get in interest won't go up if there are future Bank of England base rate rises.
The best-paying one year fixed rate deal is offered by Ahli United Bank UK and currently pays 5.7%.
The best two year fixed rate deal is offered by SmartSave at 5.56%, and the top five-year deal is offered by RCI Bank at 5.55%.
