The Bank of England has raised interest rates for the first time since July 2007 from 0.25% to 0.5% in an attempt to see off rising inflation.
The move to increase the official bank rate reverses the cut made in August 2016, which was made after the electorate’s vote to leave the EU.
7 out of 9 members of the Monetary Policy Committee, which is responsible for setting the rates, voted in favour of the rise after pointing to record-low unemployment and rising inflation.
Mark Carney, governor of the Bank of England, said:
“With unemployment at a 42-year low, inflation running above target and growth just above its new, lower speed limit, the time has come to ease our foot off the accelerator.
“That will help bring inflation back towards its 2% target, while still supporting jobs and growth.”
The rise will provide a smidgen of good news to an estimated 45 million savers in the UK, who will see modest returns over the next year.
In addition, annuity rates are linked to fluctuations in interest rates. The rise seems likely to provide higher income for pensioners and make them more attractive to those nearing retirement.
Mortgage payments will marginally rise for an estimated 4 million households with either variable rate mortgages or tracker mortgages from December 2017.
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