The Bank of England has raised interest rates again in more tough news for borrowers.
The base rate has gone up from 4.25% to 4.5%. This is the twelfth time in a row that the bank has raised rates - keeping them at their highest level since 2008.
The Bank of England has been raising rates since December 2021 in a bid to lower inflation. The rate of inflation is the change in prices for goods and services over time.
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The Bank of England has now admitted it may take longer than expected to bring inflation down in the long-term, meaning the cost of living crisis is set to continue.
Inflation dipped to 10.1% in March but remains in double digits, largely driven by the fastest rising food prices in more than 45 years.
The base rate is important because it influences what banks and lenders charge people to borrow money or pay on their savings. Borrowing becomes more expensive when rates are higher - with those on variable rate mortgages being hit hard over the last year.
More than 1.4million mortgage holders have a "tracker" that moves in line with the base rate or a standard variable rate (SVR) deal. But on the plus side, savings rates should also go up.
The Bank is now forecasting that inflation will be around 5% at the end of this year, rather than the 4% level it previously forecast. This could mean that Prime Minister Rishi Sunak may miss his target of halving inflation by the end of this year.
Chancellor Jeremy Hunt said he was still hopeful of reaching his inflation target but admitted "there's never been anything automatic about hitting it".
He added: "Although it's obviously good news the Bank is not now predicting a recession this year, it's very challenging for families with mortgages to see interest rates go up.
"But, unless we tackle rising prices, the cost of living crisis will just continue and that's why it's essential we stick to our plan to halve inflation - and if we do that we can bring certainty back to family finances."
Speaking about the impact of the rate rise on households, TUC General Secretary Paul Nowak said: “With the UK economy flatlining, and the value of everyone’s pay plummeting, another rate rise will make a bad situation worse.
“The priority should be protecting living standards and boosting the economy to safeguard people’s jobs.
“The best way to do this is by giving working people decent pay rises that keep up with the cost of living.“
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