Interest rates rise to 5.5%

Updated 13.12 Thu May 10 2007

Keywords: Mervyn King, Bank of England, Interest rates

Homeowners have been dealt another blow with interest rates rising to a six-year high.

The Bank of England hiked its base rate from 5.25 per cent to 5.5 per cent - the fourth quarter-point rise since last August.

The increase is likely to add an estimated £16 a month to the average mortgage bill for households with a typical £100,000 mortgage

The move had been widely expected after inflation hit 3.1 per cent in March, forcing the Bank's Governor to write an explanatory letter to the Chancellor for the first time.

The increase is likely to add an estimated £16 a month to the average mortgage bill for households with a typical £100,000 mortgage.

Economist Philip Shaw at Investec Securities said: "The quarter-point increase is no surprise and comes against a background of rising inflationary pressure.

"We expect a further increase to come, to take base rates to 5.75 per cent."