Mortgage bills could rise by hundreds of pounds for Scots homeowners after the Bank of England hiked the interest rate for the sixth consecutive time.
The UK's central bank announced today the basic rate would rise from 1.25 per cent to 1.75 per cent - the highest level in more than a decade - in a bid to stop spiralling inflation.
In a gloomy economic prediction, the bank also warned inflation could peak at 13 per cent in October - the highest level since 1980.
The UK is also on course to enter a full blown recession as GDP falls by as much as two per cent.
Homeowners on Standard Variable Rates (SVRs) or tracker mortgages will be hit the hardest by the latest interest rate increase.
These mortgages ‘track’ the BoE base rate, therefore monthly payments fluctuate with changing interest rates.
The rise will also come as a shock to homeowners who took out short-term fixed-rate mortgages during the pandemic and are now nearing the end of their mortgage terms.
Myles Fitt, a financial expert at Citizens Advice Scotland, said: "So many households in Scotland are struggling to make ends meet already.
"With energy bills, petrol costs and other payments higher than ever while wages stagnate, CABs are seeing increasing numbers of people who are just unable to cope.
"Today’s rise in interest rates will hit such people hard, making it even harder for them to meet their daily living costs. Governments need to recognise the scale of the crisis and make more support available to those who are struggling.
"In the meantime anyone who needs help with their finances can get free, confidential and impartial advice from their local CAB."
Ross Greer, Scottish Greens finance spokesman, said: "The financial disaster that we are living through has been driven by the total failure and incompetence of Boris Johnson, and his Tory colleagues.
"How else do you explain Britain being in a position so much worse than comparable economies?
"The public service cuts, reckless approach to Brexit and economic vandalism of Downing Street have taken a wrecking ball to our economy.
"All across the UK families are being forced to choose between heating their home or eating, all while the super-rich and major corporations are getting even richer."
Why does raising interest rates help lower inflation?
Prices have shot up around the world as a result of covid restrictions easing and consumers beginning to spend more.
Many companies have been unable to meet demand - with some items becoming hard to find in shops as a result. As a result of buyers chasing too few goods, the prices have shot up as a result.
There has also been a sharp rise in the price of oil and gas due to the ongoing war in Ukraine. One way to try to control rising prices - or inflation - is to raise interest rates.
This increases the cost of borrowing and encourages people to borrow and spend less.
What does higher interest rates mean for my bills?
Interest rates influence the interest charged on things like credit cards, bank loans and car loans.
the average annual interest rate was 20.23% on bank overdrafts and 18.56% on credit cards in June. Lenders could decide to increase these fees now that interest rates have risen.
To sign up to the Daily Record Politics newsletter, click here.
