The Bank of England has hiked interest rates to 1% as it warned the economy will go into reverse and that inflation will peak at more than 10% as the Ukraine war compounds a crippling cost of living crisis.
Members of the Bank's nine-strong Monetary Policy Committee voted 6-3 to increase rates from 0.75% to 1% - the fourth time they have voted for a rise in a row and taking rates to a level not seen since 2009.
Three members called for a bigger increase to 1.25% due to worries over rocketing inflation, with the Bank ramping up its forecast for Consumer Prices Index (CPI) inflation to rise from 7% currently to over 10% in October - its highest level for 40 years - due to soaring energy prices.
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In a grim set of forecasts, the Bank predicts growth will contract in the final three months of 2022 as the cost squeeze sees households rein in their spending.
Finance guru Martin Lewis has explained what the new interest rate means.
Taking to Twitter on Thursday, Mr Lewis said: "UK interest rates just gone up 0.25% points to 1%. This will increase variable mortgage costs by c £12/mth per £100,000 mortgage.
"No change for those on fixes (until they end). Savings rates should rise, but banks need to be held to account to ensure it happens."
Further guidance on Money Saving Expert says generally savers will benefit from base rates rises. MSE said it has asked all the main providers what their plans are and will provide an update as soon as possible.
It may be worth switching bank accounts, though savers are advised to wait a few days to see if best-buy rates improve first.
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