That's it for our live coverage of December's interest rate announcement.

The Bank will give us its next update on the base rate in February.

You can read all the detail about what today's rise means for your money here.

Today's writers were Jennifer Meierhans, Shanaz Musafer and Nick Edser, with our cost of living correspondent Kevin Peachey, business reporter Dearbail Jordan and economics editor Faisal Islam.

The page was edited by Rob Corp.

Here's a quick recap of how politicians have reacted to the latest interest rate increase from the Bank of England:

• The Chancellor, Jeremy Hunt, said while he realised it was "tough" for people at the moment, "it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target"
• Labour's shadow chancellor Rachel Reeves said this rate rise provided "further evidence that the government has lost control of the economy"
• Liberal Democrat Treasury spokesperson Sarah Olney described the rate rise as the "nightmare before Christmas for families already struggling with the cost of living crisis"

We're coming to the end of our live coverage of the interest rate rise so here's a flavour of what you've missed:

• The Bank of England raised interest rates by half a percentage point to 3.5% - the highest rate in 14 years
• The Bank said it will "respond forcefully, as necessary", if it thinks inflation will continue to rise - which indicates that more interest rate rises could be on the way.
• But the Bank expects the economy to shrink by 0.1% in the final quarter of the year, compared with previous expectations of a 0.3% fall
• Analysts now expect interest rates to peak at 4.5% next year before falling back to 3%
• Today's rise means people on a typical tracker mortgage will pay about £49 more a month while homeowners with a standard variable rate mortgage face a £31 jump.

When interest rates rise, it can have a big impact on anyone with a mortgage.

About 1.6 million people on tracker and variable rate deals usually see an immediate increase in their monthly payments.

Following today's rise, people on a typical tracker mortgage will pay about £49 more a month while homeowners with a standard variable rate mortgages face a £31 jump.

Rates have been going up for the past year though, and compared with pre-December 2021, average tracker mortgage customers will be paying about £333 more a month, and variable mortgage holders about £210 more.

Three-quarters of mortgage customers hold a fixed-rate mortgage. Their monthly payments may not change immediately, but house buyers - or anyone seeking to remortgage - will have to pay a lot more now than if they had taken out the same mortgage a year ago.

If you're struggling to keep up with your mortgage repayments, you can find more information here.

One of the factors economists have picked up on in today's announcement was the three-way split between the nine members of the Bank's rate-setting Monetary Policy Committee (MPC).

While six members of the MPC voted to lift rates to 3.5%, one wanted a bigger rise to 3.75% while two voted for no change at all.

"This divergence in views reflects the difficulty of navigating the different shocks facing the economy, with inflation elevated, but a recession likely," says Luke Bartholomew, senior economist at abrdn.

Many analysts are predicting rates will peak at 4.5% next year.

However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, reckons the Bank will raise rates to 4% at its next meeting in February but will go no further. "By the spring it should be clear... that it [the Bank] has done enough to return the headline rate of CPI inflation to the 2% target in 2024."

As we've been reporting, the Bank of England has raised interest rates to 3.5% as it attempts to bring inflation down. But the UK is affected by prices going up across the globe, so there is a limit as to how effective UK rate rises will be.

However, other countries are taking a similar approach, and have also been lifting interest rates.

Last night, the US central bank announced another rise, taking its key rate to the highest level for 15 years, while the European Central Bank raised rates today too.

Other central banks around the world have also raised rates, as inflation continues to cause problems in a host of major economies.

Peter Ruddick
Business reporter

As we've been reporting, today's interest rate rise means a typical tracker mortgage will go up by about £49 a month while a standard variable rate loan will jump by about £31.

The series of rises over the course of this year have also hit those whose fixed-rate deals have come to an end.

Clive Turner's five-year fixed-rate mortgage has just finished.

"We got a letter from our mortgage company a couple of weeks before it was due to end so it was a panic," says Clive, who lives in Pudsey, West Yorkshire with his girlfriend, stepson and cat.

"It was mega-stressful because I was trying to work but then you're looking at the news and seeing interest rates going up and I'm thinking,‘what am I going to do?’"

Clive's mortgage interest rate had been 3.48% and the couple were paying £628 a month. But their new five-year fixed deal is 5.76% with payments of £750 a month - a £122 increase.

The 48-year-old considered tracker and variable rate deals but concluded: "It's not even worth risking.

"I just wanted to fix it, take the hit, and hopefully at the end of the five years we will get something better.”

Clive works from home in customer services and says his pre-payment meter electricity costs have gone up since spring 2022 from £15 a week to £30 a week.

His gas bill, which is paid by direct debit, increased from £66 to £75 a month from 1 December.

Kevin Peachey
Cost of living correspondent

Make no mistake, these are tough times for our finances.

Interest rates and prices are rising fast, stretching everyone's budgets. That comes after a lengthy period of relative stagnation in wages and living standards, meaning we have less of a buffer to help us cope.

Yet, benefits and the state pension will rise by 10.1% in April next year - a significant move for those on lower incomes.

Watch too for the next few decisions on interest rates. The fact that two of the nine policymakers said rates should be unchanged this time signals that further rate rises - and the financial pain that goes with them - are likely, but perhaps will not go as high as previously thought.

The European Central Bank has raised all its key rates in the eurozone too, by half a percentage point.

Unlike the Bank of England, which has one main base rate, the ECB has several different rates. It has lifted:

• its main refinancing rate - how much banks have to pay when they borrow money from the ECB - to 2.5% from 2%.
• its key deposit rate - how much interest it pays on deposits by eurozone banks - to 2% from 1.5%.

Dearbail Jordan
Business reporter

I’ve left the Bank of England after an interest rate announcement that was pretty much as expected.

In a nutshell, interest rates are up again and likely to continue heading that way until prices stop rising at such a clip.

A nice touch at the lock-in today was the staff, who always look after us journalists so well, set out a delicious Christmas spread of mince pies, yule log and fancy-pants white and milk chocolate biscuits.

The BBC’s economics editor Faisal Islam might have enjoyed a mince pie or two. I like to think of it as a big dose of brain food as we digest the Bank’s economic jargon.

Anyway, that’s the last interest rate announcement we’ll get until 2 February next year. Let’s all enjoy the break until then.

While we've been reporting the interest rate rise, which aims to tackle inflation which is adding to the cost of living crisis, one of Network Rail's unions has accepted its pay offer.

Members of the TSSA at Network Rail have voted overwhelmingly to accept the company's pay offer, the union has just announced.

Network Rail owns and operates the railway infrastructure in Britain, and walkouts by members of another transport union, the RMT, have brought services to a standstill because trains cannot operate without signallers.

The Chief Secretary to the Treasury - or senior finance minister - says he recognises the latest increase in interest rates is "hard for people" but that the government is "united" with the Bank of England's determination to tackle inflation.

Speaking at the Treasury following the Bank of England's decision to raise interest rates to 3.5%, John Glen said "[Russian President Vladimir] Putin's weaponisation of energy prices" had presented massive challenges regarding inflation.

"We are united with the Bank of England in the determination to get that inflation rate down from 10.7% to the target of 2%.

"We recognise this is really hard for people across the economy. Dealing with inflation and using interest rates to do that is critically important."

The Liberal Democrats have voiced their displeasure at the latest interest rate rise.

Treasury spokesperson Sarah Olney says it's the "nightmare before Christmas for families already struggling with the cost of living crisis".

"This government's complete and utter failure to control inflation and their disastrous mini-budget have lead to mortgage payments soaring at the worst possible time of year.

"With so many not coping with high energy bills, this latest rate rise is yet more pain.

“No-one should face losing their home this Christmas because the Conservative government crashed the economy.

"The chancellor must act now before it’s too late, by bringing in a temporary ban on home repossessions and a mortgage rescue fund to support those hardest hit.

"The government must also finally bring in its long-promised ban on no-fault evictions to protect renters at risk of homelessness this winter."

Image source, gett

Reacting to the latest rate rise, Labour's shadow chancellor Rachel Reeves said: "Today's rate hike is further evidence that the government have lost control of the economy, harming growth, and leaving millions of working people paying a Tory mortgage penalty for years to come.

"After 12 years of Tory failure and wasted opportunities, only Labour offers the leadership and plans to stabilise our economy and to get it growing, so we aren't just surviving, but thriving again."

Reacting to the Bank of England's decision, Joe Nellis, professor of global economy at Cranfield School of Management, says the rate increase "will fuel the fire for public sector wage increases".

"A rise in the cost of borrowing is an unwelcome Christmas present for millions. Interest rate rises should eventually push inflation pressures down, but there is a time lag," he says.

"Meanwhile, the cost-of-living crisis continues to make it harder for millions of households to make ends meet.

"The medicine from the Bank of England tastes bitter, but it’s the only available option right now.”

So how far will rates rise? Analysts at Capital Economics reckon the Bank will want to see more "concrete and significant signs" that the economy is weakening and wage growth is slowing before halting rate hikes.

They expect rates to peak at 4.5% next year, but then predict they will come down to 3% in 2024.

Image source, Getty Images

The pound dipped in response to another interest rate hike which takes rates to a 14-year-high of 3.5%.

Sterling dropped by as much as 1% against the dollar after the announcement at noon.

It bounced back slightly but remains 0.78% lower at 1.232 against the US dollar, and 0.2% lower against the euro at 1.160.

London's blue-chip FTSE 100 share index briefly trimmed losses and was last down 0.5%.

The rapid rise in interest rates over the past 12 months has hit small firms hard, chairman of the Federation of Small Businesses Martin McTague says.

The jump in rates has cut their profit margins "at a time when many are struggling with the very cost increases which prompted the Bank of England to increase the rate in the first place", he says.

“Energy costs are by far the biggest driver of the inflation that businesses and consumers are experiencing, and interest rate increases are doing little to rein in energy bills, while making it harder for small firms to keep the lights on."

Meanwhile the Institute of Directors (IoD) has warned the recession the UK is forecast to enter needs to be "as short and shallow as possible".

“I is important the Bank does not tighten too far and risk prolonging the pain," says IoD chief economist Kitty Ussher.

“On balance, while today’s rise may be justified, given the long lead time between interest rate rises and the impact on demand, we may soon be getting to the point where enough has been done.”

Kevin Peachey
Cost of living correspondent

A higher mortgage bill will worry any homeowner who is already facing pressure from other essential bills.

The reaction has been that people are cutting back.

Separate data published today by the Office for National Statistics (ONS) suggests that more than six in 10 adults are using less gas and electricity owing to the soaring cost of living.

Charities say that people are falling into debt not because they are overspending on their credit card, but owing to the pressure of food, energy, rent and fuel costs - all of which are necessities.

More from the rate-setting Monetary Policy Committee. It has to balance taming inflation - prices rising - without putting the brakes on the UK economy to such a degree that it tips into a prolonged slowdown.

While the UK is already believed to be in recession, the Bank of England believes the economy performed better than expected between October and December.

It now expects the economy to shrink by 0.1% in the final quarter of the year, compared with previous expectations of a 0.3% fall.

The economic health of a country is measured by gross domestic product (GDP), which looks at activity across sectors including services, construction and manufacturing.

GDP shrank by 0.3% between July and September, or the third quarter, and is forecast to contract again in the fourth quarter between October and December.

But the Bank said it is not expected to be as deep as it initially thought.

When the Bank of England announces what is happening to interest rates it also provides the reasons for why it has taken action - and what might happen in the future.

According to the latest discussions by the Monetary Policy Committee, which sets the rate, it "continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary".

This indicates that more interest rate rises could be on the way.

It would mean that homeowners with variable rate mortgages or first-time buyers looking to get on the property ladder could face more pressure.

Following the most recent rate rise, people on a typical tracker mortgage will pay about £49 more a month while homeowners with a standard variable rate mortgages face a £31 jump.