Thousands of homeowners to have nearly £900 wiped from bank account

Cost of living: Why Bank of England has increased interest rates

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The Bank of England hiked the interest rate to its highest level since December 2008 as the cost of living crisis continues to bite. Financial experts believe the huge increase will only serve to worry homeowners across the country, as they’ll each see their mortgage bills increase by hundreds of pounds.

Alice Haine, personal finance analyst at Bestinvest, said: “It is unusual for a central bank to raise rates when the economy is in danger of falling into a recession.

“But the country is in the grip of a cost-of-living crisis as global challenges such as Ukraine’s war with Russia drive up food and fuel prices to dizzying highs.

“The worrying effect of higher mortgage payments is that people have less disposable income to spend at a time when household finances may already be stretched thin.”

A recession is forecast to hit the UK this year, Birmingham Live reports.

Jane Tully, director at charity the Money Advice Trust, added: “The interest rate rise 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.”

Andrew Hagger, personal finance expert at Moneycomms, said the decision to hike rates for the sixth time since December will make borrowers “wince at the thought of yet higher monthly mortgage costs”.

He said: “Customers on a fixed rate will avoid immediate financial pain, but for many of them, a triple digit increase in monthly repayments is inevitable next time their mortgage deal comes up for renewal.”

Laura Suter, head of personal finance at AJ Bell, said: “Anyone coming to re-mortgage in the next couple of months faces a huge shock in how much their monthly costs are going to rise. Someone coming off a two-year fix would have secured their last mortgage when rates were far lower.”

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