Rate rise blow

Millions hammered as interest rates hit a 13-year high

MILLIONS of borrowers have been dealt a “hammer blow” as the Bank of england hiked interest rates to a 13-year high.

The Bank’s monetary policy committee voted to increase its base rate from one per cent to 1.25 per cent – the fifth consecutive monthly rise – in a bid to reduce soaring inflation.

Almost two million households will be affected because they are on variable rate and tracker deals.

The change is likely to add about £21 a month to the typical repayments on a £150,000 mortgage on a lender’s standard variable rate. The monthly payments are up £96 since late last year, according to broker L&C Mortgages.

The rises will also affect the estimated 1.3million borrowers on fixed rate mortgages whose cheap deals are due to end this year.

Andrew Hagger, personal finance expert at Moneycomms.co.uk, said: “The latest hike in mortgage payments will be a hammer blow to households, who are facing a tsunami of increased costs for essential goods and services.” Pat McFadden, the Shadow Chief Secretary to admission Gove the Treasury, said: “This underlines the seriousness of the situation facing the economy. Families will be worrying about the impact this will have on their household bills.” Despite the latest hike, the Bank has warned inflation could be above 11 per cent in October when energy prices are set to soar again. Communities Secretary Michael Gove admitted there are “tough times ahead”. He said pressure on public finances means the Government is unable to help as much as it wants to.