The Bank of England has unexpectedly pushed up interest rates to 5%, the highest rate in almost 15 years.
The 0.5 percentage point increase was the sharpest increase since February, surprising economists who had been expecting a smaller hike of 0.25 percentage points.
Governor of the Bank of England Andrew Bailey said: "The economy is doing better than expected, but inflation is still too high and we've got to deal with it.
READ MORE: Bank of England interest rate rise to 5% and what it means for you and your mortgage
"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."
The move is set to deepen the mortgage crisis as borrowing costs are hiked up for the 13th time in a row.
When will UK interest rates go down?
The 5% increase follows a higher-than-expected inflation reading in May as continued price rises forced policymakers into action in a bid to bring inflation down to the 2% target.
Unfortunately, this means that interest rates could go up not down. Financial markets have predicted that interest rates will strike a high of 6% by early next year.
The central bank's Monetary Policy Committee (MPC) said on Thursday that it made the decision to hike rates more sharply due to "the background of a tight labour market and continued resilience in demand".
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