The Bank of England has increased the base rate by 0.5% – the biggest increase seen in 27 years.
This brings the base rate from 1.25% to 1.75%, and follows five consecutive 0.25% rises.
The steeper base rate increase is designed to keep inflation in check, which reached a 40-year high of 9.4% in June.
Indeed, some economists have previously predicted inflation peaking at 12% this year.
The 0.5% base rate echoes that seen by the United States Federal Reserve, which increased its national interest rate by 0.5% in May in a bid to slow inflation.
While the base rate has been increased from a record low base, there are worried that mortgage holders could struggle from rising costs as a result of this latest development.
Sarah Olney, the Liberal Democrats’ Treasury spokeswoman, told the London Evening Standard: “This is a hammer blow to homeowners who are already struggling to keep up with sky-rocketing bills.
“The mortgage ticking time bomb could prove disastrous for families and pensioners facing unimaginable energy bills this winter.”