The Bank of England has dealt a setback to mortgage owners by unexpectedly hiking interest rates to 5pc to combat persistent high inflation.
The Monetary Policy Committee decided to boost rates by 0.5 percentage points from 4.5pc, a larger increase than the 0.25-point rise economists had anticipated.
The Monetary Policy Committee of the Bank of England favoured increasing the rates to 5pc, with seven members voting for the rise compared to two against.
Notably, these two dissenting members argued for the Bank Rate to stay at its existing level of 4.5pc.
The last time borrowing costs hit the 5pc mark was in April 2008, yet market expectations suggest a further significant increase. Speculators are progressively betting on the Bank of England raising the borrowing cost to 6pc by the year-end.
This move follows the surprising data revealed on Wednesday that UK inflation maintained at 8.7pc in May, with core prices escalating at their fastest pace since 1992.
The escalating interest rates have amplified worries about the state of the mortgage market, as the average two-year fixed residential mortgage rate spiked to 6.15pc on Wednesday, as reported by Moneyfacts.
