Bank of England base rate increases to 4.25%.

The Bank of England has raised the bank rate from 4% to 4.25%.

The bank said that the increase, which the monetary policy committee voted in favour of by a majority of seven to two, is because “cost and price pressures have remained elevated”.

The new rate, which is the highest level in 14 years, is in response to recent unanticipated increases in inflation caused by food shortages.

The increase is likely to impact borrowers, particularly those with variable rate and tracker mortgages, whilst potentially improving returns for savers.

The Bank said that it expects inflation to come down in the near future as the energy prices, a significant contributor to inflation would “turn negative” by the end of the year.