Bank of England raises interest rate to 4%, affecting jobs, savings and mortgages

The Bank of England has lifted its base rate from 3.75% to 4%, the first increase in more than three years. The change is intended to temper inflation by reducing consumer spending, which in turn influences business investment and hiring.

Businesses with variable-rate loans may face higher borrowing costs, and some firms warn that tighter credit could limit the creation of new jobs and wage growth. Mitchell Barnes, founder and chief executive of Ryse 3D, said the rise may lead companies to rely more on automation to control labour expenses.

For savers, the higher rate can improve the returns on new savings products. Rachel Springall of Moneyfacts noted that customers who keep money in older, closed accounts may miss out on better rates, and that fixed-term deposits often offer higher yields.

Homeowners with mortgages linked to the Bank rate or on standard variable rates are likely to see monthly repayments rise, with typical increases of about £31 and £14 respectively. Those on fixed-rate mortgages will not feel an immediate impact, but future loan offers are expected to reflect the higher base rate.