The Bank of England (BoE) has agreed to raise the Base Rate for the 13th time in a row.
The Bank's Monetary Policy Committee decided to raise the Base rate from 4.5 per cent to 5 per cent per cent - a rise of .5 per cent. It means the UK's interest rate is now higher than it was during the early stages of the 2008 financial crisis which topped at 4.5 per cent.
It comes after figures from the Office for National Statistics (ONS) revealed this week that inflation rates have not changed despite a consistent increase in interest rates. In May, the Consumer Prices Index (CPI) remained at 8.7 per cent - the same rate for April.
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Why does the Bank of England change interest rates?
The BoE raises interest rates to ensure that inflation is brought down. The Bank's Base Rate is factored by the country's economical situation and it is up to the Bank to decide what will bring down the rate of inflation over the next few years.
The BoE has frequently signified that it wants inflation to drop and stay at 2 per cent. However, inflation has failed to drop down in April and May which was likely a large factor in today's decision.
The main tool used by the Bank to bring down inflation is by raising the base rate. This increase is primarily felt by mortgage-holders with a variable interest rate who may see their mortgage payments increase.
What will happen to my money now that interest rates have gone up again?
The rise in interest rates will have a direct effect on those with a loan or a mortgage with a variable interest rate. From today, you may notice the cost of your repayments going up.
However, if you're on a fixed rate, you won't see any changes to your payments until the end of your fixed period. If you're concerned about how high your monthly payments could go up, you can use a mortgage calculator to better prepare yourself.
Furthermore, if your saving account pays interest, you might see interest rates on your savings going up today.
