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Bank of England raises interest rate for first time in 10 years

Bank of England raises interest rate for first time in 10 years

By that measure, a homeowner with a £1 million (US$1.03 million) variable-rate mortgage would be paying an extra £208 (US$272) every month as a result of the rate hike. Mr.

"The link between the bank base rate and savings has been severed for years, most recently thanks to government lending initiatives, which has meant banks don't need savers' cash to fund their mortgage books as they used to", explains Rachell Springall of Moneyfacts.

Santander has said savings products linked to the base rate will move in line with the increase.

At the Black Country's biggest building society, the West Brom, a spokesman said: "The West Brom is now reviewing all its product rates for savers and mortgage borrowers following the decision by the Bank of England today November 2) to increase Bank Base Rate to 0.50 per cent".

The Late Payment of Commercial Debts Regulations of 2013 allows companies that are owed payments to charge interest at 8% of the debt plus the Bank of England's base rate.

The impact on household spending is not expected to be substantial, but the rate increase will be welcome savers who have seen returns on their capital sharply diminished over the past decade.

Broadbent has said this morning that more interest rate increases will be required to keep inflation in check.

The Bank of England announced yesterday (2 November) that the official bank rate has been lifted from 0.25% to 0.5%, the first rise since July 2007.

Not all home owners have variable mortgages, and interest payments on debt are "lower than they've ever been relative to income", he said.

However, they appear more willing to pass the rate rise on to borrowers. "Only about one-fifth of people with mortgages have never experienced an increase in bank rate".

He predicts a series of small, 0.25 per cent, increases over time, particularly while the Bank of England and the rest of the financial economy waits for some kind of certainty over the impact of Brexit.

He said he had changed his mind because of rising inflation and unemployment hitting record lows.

"The rate's rise will be gradual and modest and, in my opinion, will not affect the prime central market, which is a market unto itself", Ms. Fatemi said.

However Robert Gardner, chief economist at Nationwide Building Society, said consumers need not panic about further rises just yet.

"We'll watch it closely".