Mortgage holders on deals which track the Bank of England base rate will see more than £284 per year added to their costs on average, following Thursday’s rate hike.

According to figures from trade association UK Finance, the latest Bank of England base rate increase, from 4 per cent to 4.25 per cent, will typically add £23.71 per month to the cost of a tracker mortgage.

Borrowers on a standard variable rate (SVR) meanwhile will see their costs increase by £15.14 per month – or more than £181 per year – on average if the rate hike is passed on by their lender.

Homeowners end up on SVRs when their initial deal comes to an end and the SVR is set by individual lenders.

Martin Lewis offered a weary response to the Bank of England’s rate rise, saying mortgage holders “all know what it means”.

Those on tracker mortgages, which follow the market, will see their repayments go up, while fixed rate payers will see no change, he said.

Shadow chancellor Rachel Reeves, reacting to the rate rise, said: “This will be a cause of huge concern for many. Families are already dealing with a Tory mortgage penalty and soaring food prices.

“Labour will bring the sound economic management urgently needed to stabilise the economy.”

Mortgage rates are at a six-month low from their peak in the weeks after September’s “mini-Budget”, according to MoneyFacts.com, though lenders will be considering their next step after today’s rate rise.

Households worried about debt are being urged to seek help, as the Bank of England’s interest rates rise pushes mortgage repayments higher.

Joanna Elson CBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “Storm clouds are building for many households with today’s rise in interest rates coming a day after inflation was shown to have risen again in February.

“For homeowners already struggling, further increases in mortgage costs will be a major concern, especially for those on variable rates or coming to the end of their contracts.”

She said renters would also feel the squeeze as landlords pass rates on to tenants.

“I would encourage anyone worried about their mortgage repayments to contact their lender as soon as possible. You can also contact a free debt advice service like National Debtline or Business Debtline,” she said.

Anna Leach, deputy chief economist at the CBI business group, said the Bank of England’s decision to raise rates was a “tricky one for the MPC”.

She said it took place “against the backdrop of recent global financial market turbulence, a surprise rise in domestic inflation and a Budget which provided more support for the economy”.

She added: “The MPC will also have an eye to the recent turmoil in the banking sector.

“While financial stability is the remit of the FPC, an excessive tightening in credit conditions for businesses and households arising from financial market turbulence could cause the MPC to reconsider the level of interest rates in future months.”

The FTSE 100 remained low after the interest rates decision, after falling 66 points ahead of the decision.

Banks were among the worst performers as London’s top index sat 0.8 per cent lower at around 7,506 points following the decision.

Following the latest interest rate increase by the Bank of England, Chancellor Jeremy Hunt said: “With rising prices strangling growth and eroding family budgets, the sooner we grip inflation the better for everyone.

“That’s why we support the Bank of England’s actions today and why we will continue to play our part in this fight by being responsible with the public finances, alongside providing cost-of-living support worth an average of £3,300 per household over this year and next.”

The Bank said the chancellor’s Budget last week influenced the lower-than-expected 0.25 per cent rise, particularly the extension of the Energy Price Guarantee.

The pound has moved higher after the Bank of England’s interest rates rise.

Sterling was already around 0.3 per cent higher against the dollar before the announcement, but made further gains to sit 0.5 per cent at 1.232 after the increase was confirmed.

The pound was also higher against the euro, increasing by 0.25 per cent to 1.132.

The Bank of England’s rate rise may come as a shock to those following forecasts of falling inflation.

In a statement, the Bank said the 0.25 per cent rise was an exercise in restraint, keeping high inflation in mind but looking ahead to the expected dip.

“This lower-than-expected rate is largely due to the near-term news in the Budget including on the EPG, alongside the falls in wholesale energy prices.

“Services CPI inflation is expected to remain broadly unchanged in the near term, but wage growth is likely to fall back somewhat more quickly than projected in the February Report,” the Bank said.

The Bank of England risks pushing Britain into “full-blown recession” with the interest rates rise, according to an economic expert.

Joe Nellis, Professor of Global Economy at Cranfield School of Management, reacting the Bank of England’s interest rate decision said: “The Bank of England’s decision to increase interest rates to 4.25 per cent could push the economy into a full-blown recession.

“A growth recession was inevitable prior to the rise, but the vote by the MPC will only delay any prospects for an economic recovery.
Why has the Monetary Policy Committee voted to make matters worse?

“Households are already facing the biggest fall in their living standards for many decades, and the banking sector is under strain. Further interest rate rises will do more harm than good at this stage.”