With interest rates being increased gradually since the end of 2021, people looking to buy their first property have been met with higher mortgage rates.

Guive Shafie house-hunted for four years with his girlfriend. After a long and difficult search, their offer was accepted in November and they moved in March.

The 32-year-old and his partner opted for a tracker mortgage after seeing that fixed deals were “astronomically high”.

But since their offer was accepted, Guive says the interest rate on their mortgage has gone up four times and they are now paying around £150 to £200 more a month.

“It’s a very difficult situation because you can‘t actually plan how much you have every month,” he says.

With rates rising again from 4.25% to 4.5%, that will see those on a typical tracker mortgage pay about £24 more a month.

Jennifer Clarke
BBC News

The Bank of England is the UK's independent central bank.

One of its jobs is to keep inflation - the official measure of how quickly prices are rising - at 2%. However, despite falling back from a high of 11.1% in October 2022, inflation is still more than five times the target.

The Bank's traditional response to rising inflation is to increase the official interest rate because that affects the saving and borrowing rates charged by high street banks to individuals and businesses.

Putting up interest rates can mean people and firms are more likely to save money than spend it, and less likely to borrow, which should help stop prices rising as quickly.

Alternatively, if the Bank cuts interest rates, there is less incentive to save money and borrowing becomes cheaper. This can encourage businesses to borrow and people to go out and spend more, boosting the economy.

Read more here.

Chancellor Jeremy Hunt has reacted to the rate rise from the Bank of England, and said it was good it was "no longer forecasting recession".

But he added: "Today's interest rate rise will obviously be very disappointing for families with mortgages.

"But unless we tackle rising prices, the cost-of-living crisis will only carry on - which is why we need to be resolute in sticking to our plan to halve inflation by the end of the year."

Image source, Reuters

Meanwhile, members of different political parties have been weighing in on the interest rate rise.

Shadow Chancellor Rachel Reeves said the rise would leave people "wracked with anxiety".

"The prime minister must admit his responsibility for the Tory mortgage penalty leaving so many worse off," she added in a Twitter post.

SNP spokesman Stewart Hosie said Scottish families would be "paying the price for Tory failure" following the announcement this morning.

And the Liberal Democrats called on Chancellor Jeremy Hunt to resign if he failed to tackle inflation and help lower food bills soon.

MP Sarah Olney said: "This is a hammer blow to struggling families who simply can't balance the books with these endless price rises."

It was only six months ago that the Bank of England was expecting the longest recession on record, lasting until 2024.

A recession is typically defined as when the economy shrinks for two three-month periods in a row. Recessions can often lead to job losses as companies cut back on spending and investment.

There were warnings that unemployment could almost double by 2025, but the Bank's tune has now changed.

Now, its governor Andrew Bailey says there will now be “modest but positive growth”.

Consumer confidence has improved, says Bailey. It is still “weak”, he admits, but says levels of confidence are at their highest for a year.

Commenting on the stark contrast in the Bank’s outlook for the economy from November until now, Bailey says there has been a very substantial fall in energy prices since November.

“That was not anticipated, we were looking at the prospect of a very difficult winter”, he adds. "The economy has turned out to be more resilient."

Dearbail Jordan
Reporting from the Bank of England

Andrew Bailey estimates that the average annual energy bill will drop to £2,100 by the end of 2023.

He admits this is “still high” but is, at least, lower than the bills many people have experienced.

The bill for a typical household rose to £3,000 in April.

Bailey now moves on to talk about food prices.

He says food inflation, which is the rate at which food prices rise, has been "particularly high" reaching 19.1%.

He adds soaring food prices are not only happening in the UK, and adds inflation rates are similar across Europe.

"We are acutely aware with how difficult this rise in food prices is for people and especially for those people on lower incomes," Bailey says.

Stepping briefly away from the Bank's press conference, the pound was little changed by the quarter percentage point interest rate rise, which was widely expected by economists.

Sterling stood 0.2% lower at US$1.26 and was 0.2% higher at 1.15 euros.

Andrew Bailey kicks off proceedings at the press conference.

He says the Bank thinks inflation will fall sharply and that energy prices have fallen from their peaks.

"We think inflation should fall quite sharply in the coming months," he says.

"Food price inflation should ease too," he says, though adds that we can be less sure about the timing on this.

But he warns inflation is too high and states it's the Bank's job to get it back to 2%, which is the Bank's target rate, and have it stay there.

The reporters have now made their way from the depths of the Bank of England to the press conference area.

Andrew Bailey, the Bank's Governor, will take questions, alongside his colleagues Dave Ramsden and Ben Broadbent.

We'll keep you updated with the latest.

Dearbail Jordan
Reporting from the Bank of England

Food prices are currently a driving force behind the UK's inflation rate, which hit 10.1% in the year to March.

This is more than five times the Bank’s 2% target.

The Bank said inflation would “fall sharply in April” (those figures have not been released yet), but not as far or as fast as it previously thought. It says inflation is now expected to drop to 5% by the end of this year, higher than the 4% previously predicted.

A key pledge by the Conservative government has been to halve the rate of inflation by the end of the year.

The Bank blamed Russia’s war on Ukraine for stubbornly high food prices as well as supply chain issues in Europe.

Earlier this year, some supermarkets had to introduce limits for shoppers on some fresh goods after hot weather in Europe and North Africa affected levels of produce.

Now that the Bank has put up its base interest rate, banks typically follow suit with their own rises.

But Simon Gammon, managing partner at Knight Frank Finances, says he isn't expecting any major moves to mortgage rates, as several large lenders have already put up prices in the two weeks before today's announcement.

Michael Race
Business Reporter, BBC News

Image source, Getty Images

We've now heard that the Bank of England has raised interest rates again - those can have both good and bad impacts on your finances, depending on your personal circumstances:

• If you have a mortgage which is not on a fixed rate, such as a tracker or a variable rate deal, then you could see an increase in your monthly repayments - though some banks had already factored in the expected rise to their prices
• Increases to the Bank of England's base rate often means your bank or lender will up their rates on your credit cards or overdrafts. Sometimes lenders decide to put prices up ahead of interest rate decisions if they expect higher rates. Prior to this decision, the average annual interest rate in March , externalwas 21.07% on bank overdrafts and 20.29% on credit cards

• If you do not have fixed interest rate deals on bank loans or car loans, then lenders may also increase the amount you need to pay back in interest soon after the Bank's decision. Some banks send emails or letters out explaining that the rates have changed and how it might affect you
• If you have savings, individual banks and building societies usually pass on interest rate rises to customers - meaning you get more interest on money in savings accounts - though they have come under pressure to speed this process up and offer savers more

Seven of the nine members of the Bank of England's Monetary Policy Committee have voted to increase the base interest rate from 4.25% to 4.5%.

They said there had been "repeated surprises about the resilience of demand" and that inflation had been stronger than expected as the prices of food and other goods were higher.

The remaining two members of the committee wanted to keep rates unchanged, saying that inflation was already expected to fall considerably this year.

They also said a lot of the impact of rising rates had not yet come through into the economy. The Bank estimates that around a third of the impact of rates increases has been passed through.

Dearbail Jordan
Reporting from the Bank of England

So we've now got the interest rate decision, but what does the Bank of England predict will happen to the UK economy over the next few months?

It says the UK economy will perform better than expected this year, but households will be stuck with higher food prices for longer.

The Bank admitted it will take longer for inflation to fall, due to food prices remaining elevated.

The change in outlook for the economy contrasts sharply with the Bank’s forecast last November when it said the UK would enter the longest recession in its history, lasting two years.

It subsequently altered its forecast in February when it predicted a downturn lasting more than a year.

A recipe for a further rate risepublished at 12:07 British Summer Time 11 May 2023

12:07 BST 11 May 2023

Faisal Islam
Economics editor

The bottom line here is that this is a recipe for at least a further rate rise next month.

As well as increasing interest rates 12 times now to an almost 15-year high, the Bank of England has outlined the foothills of economic recovery starting this summer.

The economy not only avoids a recession, but now does not shrink at all from here. But on the downside, inflation hangs around like a bad smell well into next year, falling notably more slowly than expected.

Underpinning all of this is the collapse in energy prices from their Ukraine war highs, and the investments made across Europe in storing gas supplies.

This outlook is very sensitive to any changes in the energy market this winter. The economy is now forecast to make up the ground lost since the pandemic by the end of this year, rather than 2025. It is a significant upgrade from the very weak forecasts made last year.

Even as it is, inflation is expected to be above 5% at the end of the year, and 3-4% in June 2024.

UK interest rates have been raised for a 12th time in a row in a further attempt by the Bank of England to slow rising prices.

The increase to the Bank's base rate from 4.25% to 4.5% means rates are now at their highest level since the height of the global financial crisis in October 2008 when several banks collapsed, almost 15 years ago.

The rise is likely to heap further pressure on many households struggling with the cost of living.

It will mean higher mortgage payments for some homeowners, while people looking for loans will face higher borrowing costs. However, high interest rates can benefit savers.

Robert Cuffe
Head of statistics

Alongside the interest rates decision, which is due shortly, the Bank of England will also publish its economic outlook - or forecast - giving its assessment of how things might look in the months ahead.

Professionals don’t think of forecasts as a map of the future that’s precise to seven decimal places.

Sonali Punhani, an economic forecaster at investment bank Credit Suisse, says she’s more interested on the story the figures tell than the exact numbers.

She runs multiple forecasts to see how things change if events turn out differently.

And events do turn out differently: who predicted the pandemic or the war in the Ukraine as the most-likely-thing-to-happen-next-year?

You might believe someone who told you: “Man City are favourites to win the league next year” - but be sceptical of someone who said: “They’ll finish next season with 97 points."

The same goes for the economy.

You can read more on the accuracy of forecasts here.

Faisal Islam
Economics editor

Resilience is the word I would use, having taken the temperature of the economy over the past week.

Some prices have peaked and are coming down, but they remain significantly higher than where they were a year ago. Consumers have adjusted spending habits.

There are visible and less visible signs of tough times in terms of homelessness and food charities. Some retailers simply do not stock ordinary vegetables that are just too pricy for their customers, for example, broccoli.

Even as inflation comes down, perhaps sharply, that will take some time to feed through.

Businesses remain cautious about investment, which is the foundation stone of future growth.

Janice and her husband, both in their 70s, are private landlords from Enfield, North London, with two properties they were hoping would fund their retirement.

Speaking to Radio 5 Live's Nicky Campbell, she says they have always seen themselves as "good landlords" and have kept the rent as low as they possibly can, but will have to put rents up by £600 a month on both properties after their fixed-rate mortgages end in October.

"Because we've kept the rents low, both tenants have lived in our houses long-term, one has lived there 20 years and the other for 10," she says.

Their tenants have agreed to paying the £600 rent rise in October as they can't find other accommodation for a comparable price, but Janice says today's expected announcement may mean that increase won't cover the cost of the mortgage.