UK interest rates raised to highest level for 14 years

The Bank of England has raised UK interest rates to their highest level for 14 years as it battles to stem soaring prices.

It lifted interest rates for the ninth time in a row, increasing them to 3.5% from 3%.

The rise will hike mortgage payments for some homeowners and those with loans at a time when many people are struggling with the cost of living.

It should also benefit savers, if banks pass on the higher rate to customers.

The Bank of England has been attempting to calm rising prices since the end of last year.

Inflation - the rate at which prices rise - has been increasing at its fastest rate for 40 years.

The Bank also indicated it was likely to continue to raise interest rates next year.

It means that homeowners with variable rate mortgages or first-time buyers looking to get on the property ladder could face higher costs.

Following the most recent rate rise, people on a typical tracker mortgage will pay about £49 more a month while homeowners with a standard variable rate mortgages face a £31 jump.

However, the Bank of England has to balance increasing borrowing costs without causing the economy to slow too much.

The UK is already believed to be in recession due to the impact of soaring prices on businesses and consumers.

A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row.

Typically, companies make less money, pay falls and unemployment rises. This means the government receives less money in tax to use on public services such as health and education.

However, the Bank said it believed the economy would perform better than expected between October and December - shrinking by 0.1% in the final three months of the year rather than 0.3% as previously thought.