The Bank of England has lifted interest rates to another 15-year high as policymakers continue to face down the cost of living crisis.
The Bank's Monetary Policy Committee (MPC) today lifted the base rate by 0.25 percentage points to 5.25%.
The last time it stood at 5.25% was in March 2008.
That is a smaller increase than the half-point rise pushed through at the last MPC meeting.
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There are ongoing signs that price rises are beginning to cool, meaning there may be less pressure for rate rises.
The MPC voted 6-3 in favour of this rise. Two members preferred to increase Bank Rate by 0.5 percentage points, to 5.5%, and one member preferred to maintain the rate at 5%.
The Bank said today: "Recent data outturns have been mixed. However, some key indicators, notably wage growth, suggest that some of the risks from more persistent inflationary pressures may have begun to crystallise."
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It added: "Given the significant increase in Bank Rate since the start of this tightening cycle, the current monetary policy stance is restrictive. The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation.
"If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required. The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with its remit."
Chancellor Jeremy Hunt said: “If we stick to the plan, the bank forecasts inflation will be below 3% in a year’s time without the economy falling into a recession.
“But that doesn’t mean it’s easy for families facing higher mortgage bills so we will continue to do what we can to help households.”
Shadow chancellor Rachel Reeves said: “This latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.
“The Tory mortgage bombshell is hitting families hard, with a typical mortgage holder now paying an extra £220 a month when they go to re-mortgage.
“Responsibility for this crisis lies at the door of the Conservatives that crashed the economy and left working people worse off, with higher mortgages, higher food bills and higher taxes.”
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海角视频 Consumer Prices Index (CPI) inflation was 7.9% in June, down from 8.7% in May and the lowest rate since March 2022, according to official figures from the Office for National Statistics (ONS).
Any rates increase piles more pressure on borrowers who are already facing big increases in monthly bills thanks to mortgage rates moving higher.
There are also signs higher rates are hitting the 海角视频 economy.
Nationwide said house prices fell at the fastest annual rate in 14 years in July, as affordability has been stretched for people looking to buy a home with a mortgage, while housebuilders have also seen weaker demand.
Growth in Britain’s services sector also slowed last month, as concerns over interest rates and the economic outlook took a toll on consumer demand, S&P Global said in its PMI survey.
Michael McGowan, managing director of foreign exchange at Bibby Financial Services, said: "There’s an air of ‘Groundhog Day’ about the Bank of England’s decision to raise interest rates yet again. This fourteenth hike in a row pushes rates to their highest level since March 2008, and while the 0.25% increase is lower than might have been expected, the continuing upward trajectory seriously undermines the growth ambitions of businesses up and down the 海角视频. For those already struggling with margin erosion and cashflow challenges, ever-higher interest rates signal more pain to come, and the likelihood of yet more insolvencies over the medium term – especially among SMEs.”
Matt Thompson, head of sales at Chestertons estate agents, said: “We expect the rate rise to have a particular impact on homeowners with a variable mortgage as well as overleveraged buy to let investors whose increased mortgage payments could result in their investment making limited profit or a loss.
"Although there still is a vast number of buyers wanting to move as soon as possible, rising interest rates are forcing house hunters to be more cautious, review their financial situation and calculate a more conservative budget. Whilst this has recently resulted in fewer new buyers entering the market, we expect activity to pick up again once buyers have adjusted their criteria and lenders are bringing more products to the market again.”
Phillip Nelson research officer for industry body Propertymark, said: "An interest rate rise of only 0.25% has been widely anticipated since June's inflation figures. Seeing this come to pass is a good sign that we will soon see interest rates peak.
"Peaking rates will be a positive sign for many homeowners, and even lays out some hope that fixed mortgage rates will start to fall."
Steven Edwards, partner, recovery solutions, Crowe 海角视频, said: “Today’s announcement by the Bank of England to raise interest rates to the highest levels not seen in the 海角视频 for 15 years to an eye watering 5.25% was expected, but as rates rise more 海角视频 businesses are at risk of insolvency.
“Returning inflation to below the government’s 2% target remains a stubborn challenge for the central bank and historic high interest rates is making lending more expensive and stifling investment. As business bank lending is expected to decline by nearly 4% in 2023, balancing the ongoing difficulty of affording existing debt and managing short-term cash flows with raising capital to invest remains a double-edged sword.
“Insolvency numbers in the 海角视频 are spiralling, reaching record highs with nearly a one third increase to over 2,000 appointments to distressed businesses in June compared to the same time last year, having faced waves of economic shocks with significant interest rate increases, Brexit, the highest inflation rate in the G7 and readjustment to the post-pandemic consumer environment.
“The path to growth and stability could be way off for many businesses as forecasts predict the base rate may remain high until the early part of 2024. For many, the path out of the current doldrums could be a long and weary grind and in this tough economic environment, those with the deepest pockets are likely to survive into next year.”