The Bank of England has raised interest rates for the first time in more than 10 years in a landmark move after borrowing costs slumped to the lowest level on record.
Alongside Governor Mark Carney, the majority of rate-setters at the U.K.‘s central bank voted in favour of hiking the benchmark rate to 0.5 percent from 0.25 percent.
The bank’s key rate is crucial for the economy as it is used to price all sorts of bank loans and mortgages.
The move reverses the cut in August of last year – made in the wake of the vote to leave the European Union.
Almost four million households face higher mortgage interest payments after the rise, but it should give savers a modest lift in their returns.
The BOE’s decision to rate hikes sees the central bank fall in line with the U.S. Federal Reserve and to some extent the European Central Bank, which are either raising rates or beginning to scale back stimulus.
However, while the U.S. and the euro zone are enjoying solid growth, Britain’s economy has grown at its slowest pace since 2013 over the past 12 months.
Ahead of the announcement, the BOE had expressed concern that the U.K.‘s economy had been overheating, with inflation soaring to a five-year high of 3 percent in September and unemployment hitting multi-decade lows.