Nick Eardley
Chief political correspondent

The interest rate rise will be a blow to many households - mortgage holders who face higher borrowing costs and renters who might see those costs passed on.

But the government is extremely reluctant to get involved.

Treasury officials believe any sort of subsidy scheme would make things worse.

Labour agrees - neither of the UK’s main parties think government money can soften the blow.

Instead, they want to put pressure on the banks to provide more flexibility for customers.

There are some politicians though who think the government will have to take action.

The Lib Dems are advocating a fund to help people who are facing a big jump in mortgage costs.

Some Conservatives want tax relief on interest payments, as has happened in the past.

But when the PM responds this afternoon, he will say the best strategy is to keep going with the current strategy to do whatever is required to bring down inflation.

That is likely to mean pain for a lot of households.

Daniel Thomas
Reporting from the Bank of England

When the Bank makes decisions to change interest rates, it also provides its reasons for them.

Its Monetary Policy Committee (MPC), which has just set the interest rate, says that inflation in the services sector has remained persistently high, while wages are growing faster than it had predicted back in May.

It added that the impact of “domestic price and wage developments… were likely to take longer to unwind than they did to emerge”.

In a letter to Chancellor Jeremy Hunt, the Bank’s Governor Andrew Bailey said that overall inflation is still set to fall “significantly” during the course of the year as energy prices come down.

But he added that the Bank would continue to monitor inflation closely, and would further tighten monetary policy if there “were evidence of more persistent pressures”.

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Let's bring you some fresh reaction from the chancellor who says the government has a "watertight" resolve to bring inflation down adding "if we don't act now, it will be worse later".

Jeremy Hunt says high inflation is the "greatest immediate economic challenge" the UK must address.

"High inflation is a destabilising force eating into pay cheques and slowing growth," Hunt said.

"Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.

"Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages.

Rate rise may have been sealed by yesterday's inflation figurespublished at 12:13 British Summer Time 22 June 2023

12:13 BST 22 June 2023

Dharshini David
Economics Correspondent

With a dramatic 0.5% rise, the Bank is determined to show it’s serious about inflation - despite concerns about the pain inflicted by higher rates.

That decision may have been sealed by yesterday’s inflation figures - which suggested that there was enough extra demand that many consumers are happy to pay higher prices for treats such as hotel stays or meals out.

It’s this that the Bank is deliberately targeting, as per its remit, by hiking the cost of borrowing, to curb price rises.

The 13th rise in a row is very unlucky for some - but it's a smaller group of mortgage holders than in the past.

Only 15% of mortgage holders are on deals linked to variable rates - compared to 70% 20 years ago.

The impact on other mortgage holders is more gradual - hitting, agonisingly, as they look to refix. So the impact of rate rises may be slower and more unpredictable than in the past.

With inflation also defying expectations to stay stubbornly high, many economists expect the Bank to go further.

The impact of those higher mortgage rates might be focused on a relatively smaller proportion of households but for them the pain is particularly acute.

And if that triggers an extreme slowdown in spending, many more will feel the fallout from this policy-engineered slowdown in their pockets.

Rate-setting is a risky business.

Faisal Islam
Economics editor

Rates have not been at 5% since just before the global financial crisis and collapse of Lehman Brothers in September 2008. They were last at this level in April 2008.

But the UK economy, and in particular the mortgage market, is very different now.

The Bank in its deliberations repeatedly referred to the fact that the "full impact" of the rate rise not being felt "for some time" because of the prevalence of fixed rate mortgages.

There is a risk therefore that rates are having to go higher than otherwise, and as the Institute for Fiscal Studies think tank has pointed out, the burden of the inflation reduction pain is being shouldered disproportionately by 1-2 million young homeowners.

The Bank still thinks that inflation will "fall significantly" in the coming months because of energy prices, and a fall in prices in the food supply chain.

But this rate rise will also put further pressure on the economy. It is designed to do so. And further rises, starting in August, will follow if the data continues to disappoint.

The surprise hike of 0.5% means those on a typical tracker mortgage will pay about £47 more a month. Those on standard variable rate mortgages will face a £30 jump.

Eight out of 10 mortgage customers hold a fixed-rate mortgage so their monthly payments may not change immediately, but house buyers or anyone seeking to remortgage face a sharp rise in repayments when they move on to a new deal.

The so-called "mortgage bomb" has become a huge economic and political issue. An average two-year fixed deal, which was 2.29% in November 2021, is now above 6%.

Faisal Islam
Economics editor

A shock half percent interest rise is designed to try to demonstrate the Bank has some control over the growing inflationary fires in the British economy.

Seven of the nine-member committee decided to accelerate interest rate rises given the rise of price pressures seen in inflation and jobs data.

An important a consideration was the recent rise in the market rates for government borrowing in the UK, and not the US or Europe.

This was financial markets starting to ask the question about how tough the Bank is going to be on inflation.

The Bank notes how super sensitive markets are to every morsel of new data, which is not a happy sign.

This is the Bank's answer for now.

UK interest rates have been raised to 5% by the Bank of England, as it battles to control soaring prices.

The Bank has increased rates to 5% from 4.5% - the 13th increase in a row.

The Bank of England has a target to keep inflation - the rate at which prices are rising - at 2%, but the current rate is far above that at 8.7%. The traditional response to rising inflation is to put up interest rates.

This makes borrowing more expensive, and can mean some people with mortgages see their monthly payments go up. Some saving rates also increase.

When people have less money to spend, they buy fewer things, reducing the demand for goods and - in theory - slowing price rises.

Businesses also borrow less, making them less likely to create jobs, and may cut staff.

In May, the Bank increased interest rates for the 12th time in a row, taking the main rate to 4.5%.

You can watch our coverage on today's interest rate decision by pressing the Play icon at the top of this page.

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Thanks for joining our coverage this morning as we build up to the Bank of England's announcement.

We're expecting to hear it is going to raise interest rates - again - for the 13th time in a row - as it tries to calm inflation, the rate at which prices are rising

But we don't know how much it will raise it's official rate - the base rate - by. It could go up from 4.5% at the moment to 4.75%, or possibly to 5%.

Raising the rate will mean further pain for some homeowners, but could benefit savers.

The announcement is due to be made at midday - we're poised to bring you updates, reaction and analysis. Stay with us.

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Prime Minister Rishi Sunak is due to speak later today at an economy-focused event in Kent, and as often happens, journalists have been told some of what he is expected to say.

He is expected to reassure workers about the pressures caused by rising prices, saying: "I feel a deep moral responsibility to make sure the money you earn holds its value.

"That's why our number one priority is to halve inflation this year and get back to the target of 2%.

"And I'm completely confident that if we hold our nerve, we can do so."

The Bank of England is tasked with trying to keep inflation at 2%.

Michael Race
BBC Business Reporter

People that are in the process of remortgaging their homes or those not on fixed-rate deals - where interest rates are set at certain level - might well be watching today's interest rate decision closely.

Mortgage holders - a third of adults in the UK - are facing large increases in repayments when fixed-term deals come to an end. Many are on such deals, so have been shielded by rate rises to date, although around a quarter are due to finish by the end of this year, which will expose them to higher costs.

Data released by the financial data company MoneyFacts says the average two-year fixed mortgage rate today is 6.19% - which compares to a peak of 6.65% in the aftermath of former PM Liz Truss's mini-budget last September.

In March 2022, the average rate was 2.65%.

Joe Cussens is managing director of The Bath Pub Company, which like many hospitality businesses took out loans to survive through the pandemic to survive.

He says rising interest rates mean the cost of servicing those loans has gone up - but he says the business has been hit harder by customers feeling the increased cost-of-living.

"Interest rates are making their mortgages more expensive, an obvious place to cut back is their spending in pubs," he says.

"Last year we had to renew three of our energy contracts, it was a bit like negotiating with a gun against your head. The prices offered were horrific but you had no option but to take them.

"It seems to be the received wisdom that putting up interest rates is the way to tackle inflation but I think the government should be doing more to help businesses through this time and to fight inflation in other ways."

Why is the Bank poised to increase borrowing costs again?published at 11:01 British Summer Time 22 June 2023

11:01 BST 22 June 2023

Dharshini David
Economics correspondent

Currently, the main policy aimed at curbing soaring prices works by deliberately squeezing spending via higher rates.

The theory is if people have less to spend, it makes it harder for firms to push up prices.

Inflation figures suggest there is more to target.

So-called core inflation is at its highest rate for three decades - that measure includes some little luxuries including clothes, hotel stays and eating out.

That stronger demand may reflect savings built during the pandemic.

Or it may reflect some bigger wage rises than might be expected given the state of the economy - perhaps reflecting a shortage of staff, exacerbated by Brexit.

But, raising interest rates isn’t a precise science. With only 15% of home loans on variable or tracked rates now, it takes longer for changes to filter through, the majority of mortgage holders will only feel the squeeze when their fixed-rate deals come to an end and they have to move to a new rate.

So there’s a risk that rate rises could go too far and cause the economy to shrink and jobs to be lost, when many incomes are already suffering.

Daniel Thomas
Business reporter

I’m at the Bank of England and just about to go in to be briefed on today’s rates decision.

For those unfamiliar with the process, journalists are locked in (literally) to a room in the bank’s basement around an hour before the figure is made public.

We then get to review and write up the bank’s report, with no access to phones (which are locked away by officials) or the internet.

Attendees can’t leave the vault for the entire hour, nor is there any access to toilet facilities - so I’ll be going before.

All of this security is because interest rate decisions can “move” the financial markets, so it’s imperative that the announcement does not get out before midday on the dot, as planned.

Today's a big day for news about the economy, but yesterday was too. The soaring cost-of-living remains a huge issue, and there had been hopes that figures out yesterday would show inflation - the rate of price rises - was continuing to fall. But the data told a different story:

• Inflation, which measures the pace prices rise at, stayed at 8.7% in May, the same as April
• The pace of food prices fell slightly to 18.3% from April's 19.0% but is still much higher than a year ago
• Expectations grew that the Bank of England would raise interest rates again today - perhaps beyond 4.75% and up to to 5%
• Chancellor Jeremy Hunt said the government would "not hesitate" in its resolve to support the Bank as it "seeks to squeeze inflation out of our economy"
• Core inflation- which strips out energy, food, alcohol, and tobacco - rose to 7.1% in the year to May, the highest level since 1992
• Other figures show UK debt is now higher than annual GDP for the first time since 1961
• Labour’s Shadow Chancellor Rachel Reeves blamed the government for failing to "get a grip" of inflation while Lib Dem Treasury Spokesperson Sarah Olney said homeowners now “face the likelihood of even more interest rate hikes”

Read more: UK inflation shock - this is really grim

Ewan Cameron bought a flat in London two years ago and has just managed to secure a new fixed-rate mortgage deal, but not before he had two mortgage offers pulled.

He has now got to find an extra £400 a month to pay for his home, and is considering renting out the spare room to help pay for it.

"I remember speaking to a friend who bought at roughly the same time and he locked into a five year mortgage, we both joked about who would end up on the better end of the spectrum in a couple of years' time - he's certainly the one laughing and I'm certainly the one paying the price," he said.

Image source, Getty Images

Sir Charlie Bean, a former deputy governor of the Bank of England, told the BBC's Today programme that if he were on the committee today he would "probably vote for a 0.5% hike".

The news since the last meeting had been unambiguously bad on an inflation front, he said.

"You've had two bad inflation releases and also the labour market release showed pay growth much stronger than they would have expected - you put all of that together and it's a pretty clear signal it needs further rate increases."

Sir Charlie said the question for the Bank was whether they wanted to do a "big step today, or a smaller step, but maybe indicating there will be more [rate rises] in the pipeline".