The Bank of England has announced its biggest interest rate rise in 27 years.

To keep inflation under control, policymakers increased interest rates by 0.5% to 1.75% on Thursday. This was in an effort to maintain a lid on inflation which is expected to rise above 13% this Autumn.

Eight members voted in favour of the aggressive move, with a majority voting for it. Only Silvana Tenreyro, a dovish member, voted for a modest 25 basis point increase.

Although the aggressive rate hike would normally support the Pound, traders seem to be focusing on the dire outlook for inflation and its effect on the economy.

Next year, two million homeowners will be affected by a “remortgage rates shock”

The Monetary Policy Committee increased rates by 50 basis points. This is the sixth consecutive increase and the largest since 1995.

This comes as Governor Andrew Bailey struggles with the highest inflation rate in 40 years. The problem is made worse by skyrocketing energy costs, triggered by Russia’s war on Ukraine.

As a result of complaints that it is too slow to act or has misled the markets, increasing pressure has been placed on the Bank to increase the rate at which interest rates rise.

It has also been under increasing political scrutiny. Liz Truss, the Tory leader, has pledged to review the Bank’s mandate in order to control inflation.

According to the MPC, inflation is expected to rise above 13pc by the end of the fourth quarter. This is an increase from 9.4pc in June, and it’s more severe than its previous predictions of an 11pc peak.

The report stated that inflation would “remain very high throughout 2023 before falling to 2pc in the two years ahead”.

Karl Thompson of the Centre for Economics and Business Research, a research firm, stated that a half-point rise is what they expect, something which hasn’t happened in almost 30 years. It will come on top of a series of rate increases, which is the key point. We are entering a new age.”

Monthly mortgage payments for homeowners with an average PS270708 property and a 25pc deposit of PS196 will be 0.5 percentage points higher than they were in November 2013. This is according to Moneycomms, a financial app, and TotallyMoney.

Rising costs will immediately affect nearly two million homeowners. Nationally, nearly 1.1 million homeowners have standard variable-rate mortgages, while 850,000 are on tracker rate mortgages. These rates will rise in response to the Bankrate.

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