INTEREST rates have jumped 0.25 per cent to 1.25%, their highest level since January 2009.
Citizens Advice Scotland warned that the hike would hit households already “struggling to make ends meet.”
Meanwhile, homeowners with variable mortgage rates - those that move in line with the Bank rate - will see their monthly repayments go up.
According to trade body UK Finance, the annual average increase for homeowners with single variable-rate mortgages will be £191, while for those on tracker deals it will be £303.
The Bank of England’s monetary policy committee were split on the decision to raise rates, with three of the nine members backing a larger increase of 0.5%.
It comes after the rates in the US rose by 0.75% overnight.
In minutes of the latest decision, the Bank said they now expected Consumer Prices Index (CPI) to peak above 11% in October.
The Bank said: “CPI inflation is expected to be over 9% during the next few months and to rise to slightly above 11% in October.
“The increase in October reflects higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.
“In the MPC’s latest forecasts in May, upward pressure on CPI inflation was expected to dissipate over time.
“In the main, this reflected the stabilisation of the prices of commodities, albeit at elevated levels, and other tradable goods.
“It also reflected the combined impact of weaker real incomes and tighter monetary policy on domestic demand. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target.”
Citizens Advice Scotland Financial Health spokesperson Myles Fitt said: “So many households in Scotland are struggling to make ends meet already.
“With energy bills, petrol costs and other payments higher than ever while wages stagnate, CABs are seeing increasing numbers of people who are just unable to cope.
“Today’s rise in interest rates will hit such people hard, making it even harder for them to meet their daily living costs.
“Governments need to recognise the scale of the crisis and make more support available to those who are struggling.”
The Federation of Small Businesses's Policy and Advocacy Chair Tina McKenzie described it as a "scary moment".
She said: “The Bank of England recently used the word stagflation in connection to the current economic crisis, which is noteworthy and deeply worrying. Low growth coupled with high inflation will be a death knell to countless small businesses.
“This is a scary moment. It’s hard to overstate how devastating the current spiralling inflation levels are, for businesses and consumers alike, and the longer the situation goes on, the more the damage compounds.
“The Bank is required to try and rein inflation in, although there are question marks over how much it can actually do, given that many of the factors behind inflation, from war in Ukraine to oil prices, are outside its control.
“Anything which adds to the margin pressure small firms and sole traders are facing – such as an increase in debt costs as the base rate rises – is hard to swallow.
"Small businesses are bearing the brunt of this crisis, with cash reserves eroded throughout the pandemic and with late payments intensifying.
“The Government needs to act now."
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