The Bank of England’s monetary policy committee (MPC) of nine members voted eight to one in favour of a rise to 1.75%.
But one member of the MPC – Silvana Tenreyro – was out-voted in calling for a quarter point rise to 1.5%.
In minutes from the rates decision meeting, the Bank said the majority of the MPC felt a “more forceful policy action was justified”.
It said: “Against the backdrop of another jump in energy prices, there had been indications that inflationary pressures were becoming more persistent and broadening to more domestically driven sectors.”
“Overall, a faster pace of policy tightening at this meeting would help to bring inflation back to the 2% target sustainably in the medium term, and to reduce the risks of a more extended and costly tightening cycle later,” the Bank added.
What are the Bank of England interest rates?
The Bank of England’s base interest rate is the UK’s most influential rate and its official borrowing rate.
The purpose of this base rate is to help to regulate inflation.
The Bank of England defines interest rates as "what you pay for borrowing money, and what banks pay you for saving money with them”.
Rising interest rates mean that consumers will see very little interest on their savings, but will be able to borrow money at long-term fixed rates.
Why did the Bank of England change interest rates?
The government sets the Bank of England an inflation target to keep it balanced.
From there, the MPC then votes on the interest rate that would suit best.
The increase earlier this year was due to rising energy bills pushing inflation higher than expected.
The original prediction for April 2022 was 6%, but is now expected to be closer to 7.25%.
As a result, the MPC concluded that an immediate rise was necessary due to the fears of the impact of Covid-19 on the economy.
The Bank of England said it would likely continue to raise rates this year and in 2023, rising to 1.5% by mid-2023.
How does the Bank of England interest rate affect mortgages?
When it comes to mortgages, a rise in interest rates could see variable rate mortgage payments go up.
If you’re on a fixed rate mortgage, then you will be protected from any such changes for the period that you are fixed for.
For example, a two-year fixed mortgage from now will see you paying the same monthly amount until February 2024.