Interest rates have been hiked again this afternoon with the Bank of England (BoE) confirming its biggest rise in almost 30 years.
The central bank has increased its base rate from 1.25% to 1.75% - a rise of 0.5 percentage points.
It is the sixth time in a row that the BoE has hiked interest rates - and marks the largest increase in 27 years.
It also takes UK rates to the highest level since the end of 2008.
The base rate is what the central bank charges other banks and lenders - this in turn then influences the rates they charge customers.
If interest rates are higher, you'll pay more to borrow on products like mortgages.
But it should in theory be good news for savers, as banks should pay out more on your savings.
Are you worried about rising interest rates? Let us know: mirror.money.saving@mirror.co.uk
The BoE is raising interest rates to try and cool soaring inflation, which is currently at a 40-year high of 9.4% and is expected to keep rising.
The theory behind raising interest rates, is that households will spend less and this should mean inflation will drop.
This week, the Resolution Foundation think tank warned inflation could hit 15% early next year, in further misery for households.
It means interest rates is likely to keep rising as well, to try and keep inflation under control.
The BoE predicts inflation could hit 13% toward the end of the year - far off its target of 2% inflation.
Speaking last month, a member of the Bank of England rate setting committee said interest rates might have to hit 2% or more next year.
It comes as energy bills continue to soar, heaping more pressure on households during the cost of living crisis.
The BoE today said it expects the UK to enter recession in the last three months of this year, and throughout 2023, with gross domestic product falling by 2.1%.
Jane Tully, director of external affairs and partnerships at the Money Advice Trust, said: "Today’s interest rate rise, the largest in 27 years, will add to the worries of homeowners already struggling with soaring prices.
"October’s energy price rise is just around the corner and with inflation predicted to continue to increase into next year, there is little respite in sight for millions of people."
What it means for your mortgage
If you're a homeowner, the type of mortgage deal you're on will determine if your bills will go up.
Those with a tracker mortgage will see their rate go up as these deals move in line with the base rate.
If you're on a standard variable rate (SVR) mortgage, then you'll likely see your rates go up as well.
It'll be down to your lender whether to pass on the increase - and most major banks and building societies do decide to do this.
Homeowners could see hundreds of pounds added to their mortgage bill following the 0.5 percentage point rise.
You'll usually be on an SVR type mortgage deal after your fix or tracker rate ends.
Around two million people are on a variable rate mortgage.
If you have a fixed-rate mortgage, your rates won't change.
Brian Murphy, head of lending at Mortgage Advice Bureau, urged anyone on a variable rate to consider locking into a deal now ahead of more expected rate rises.
He said: “New and existing borrowers should seriously consider locking a fixed term deal to protect them from any further rate rises.
“With economists predicting inflation to soar even higher, interest rates may well follow suit for a while longer."
What it means for your debts
The cost of borrowing on credit cards and your overdraft could increase too following the base rate rise.
Credit card rates are normally variable, so they can change from time to time.
Their rates are not typically linked to the base rate - but they have been going up over time regardless.
Your lender should give you notice if your rate is going up or down.
Interest rates on most personal loans and car financing are fixed, which means the rates on these shouldn't change.
However, you may find cheaper loans start to disappear as most lenders will start to advertise a higher rate.
Garrett Cassidy, VP Financial Products at the money app Monese, said: "Lenders generally tighten their approval criteria as the cost of living increases so it could also get harder for some consumers to take out a loan from now on.
"This means some families could be faced with narrowing options when it comes to their finances."
What it means for your savings
If you're got money stashed away into a savings account, you should see a higher return on the interest you're paid.
Banks should pass on the interest rate rise - but there is no guarantee they will, and some take time to introduce new rates.
It is worth noting too that savings rates are also still painfully below the level of inflation.
The top-paying easy access account right now is from Virgin Money and offers 1.71%.
If your cash is locked into a fixed rate account, then the rate you get in interest won't go up.
The top-paying one-year fix right now is from OakNorth Bank and offers 2.85%, while a five-year fix from Shawbrook Bank pays 3.4%.
Colin Dyer, financial planning expert at abrdn said: “While a higher-than-normal rate increase to 1.75% will be welcomed by savers, it’s still no match against the current 9.4% inflation.
“There is an undeniable financial pressure on cash-strapped households that will continue to mount in the months to come, with soaring energy, food and fuel prices showing no signs of slowing.
“A 0.5% rate rise won’t be enough to balance this out.“
