SCOTS householders are to see a huge hike in mortgage costs today as the Bank of England announces a 0.5% rise in base rates.

The Bank of England rise will hit the 200,000 in Scotland on either standard variable rate mortgages or tracker mortgages.

UK interest rates have increased to 2.25% - the seventh time in a row the Bank of England has raised rates in an attempt to get control over rising prices.

The rate has been lifted by half a percentage point from 1.75% and takes borrowing costs to their highest levels since 2008 during the global financial crisis which resulted in the big banks bailout.

Interest rates have been rising since last December as inflation has soared to its worst level in four decades.  Prices in August were 9.9% higher than they were 12 months ago.

Russia's invasion of Ukraine has pushed up the price of oil and gas, while shortages of goods globally have also made things more expensive.

When interest rates rise, people on tracker and variable rate mortgages go up, while the cost of credit card debt and other loans can also increase.

According to analysis supported by analysts Moneyfacts, the typical Scots householder with a variable rate mortgage with £100,000 of debt remaining will see their mortgages rise by £361.84 a year.  

More than 100,000 fixed-rate mortgage deals which it is estimated are scheduled to end during 2022 in Scotland will also be hit. 

Rocio Concha, director of policy and advocacy with the consumer organisation Which said: "This rate rise means millions of homeowners  in the UK are facing significant hikes in their monthly outgoings at a time when rising food, energy and fuel costs are already stretching household budgets. This will be a particularly tough time for mortgage prisoners, some trapped on punitive rates for years and for whom help from government and regulators is long overdue."

The cost of living is increasing at nearly its fastest rate in 40 years, driven largely by the rising cost of food and fossil fuels.

Increasing interest rates puts consumers and businesses off spending or borrowing, providing a greater incentive to save. As demand for goods and services fall, in theory, that should have an prevent costs from rising.

The Bank of England has lowered its forecast for inflation, due to the energy price freeze.

They now predict that CPI inflation is likely to peak in October at just under 11% – lower than the peak of 13% forecast last month, before the two-year cap on bills was announced.

The minutes of the meeting warn, though, that we could suffer double-digit inflation for months.

Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back.

The Bank of England  also forecast that the UK economy is already in recession.

It said that it expected gross domestic product (GDP) - which is a measure of all the goods and services produced by the UK - to have shrunk by 0.1% between July and September.

A recession is defined as two consecutive quarters – or two three-month periods – of shrinking GDP.

UK output shrank by 0.1% in the second quarter of the year.

The Bank of England had previously predicted that GDP would grow between July and September before beginning to slow down in the final three months of the year. 

According to analysts Moneyfacts, the number of available mortgage products plummeted by 517 over the month to leave just 3,890 on offer for September, the lowest number they have seen in over a year.

It is 1,425 fewer than were available at the start of December 2021 (5,315) before the first of the series of Bank of England base rate increases. 

Before the base rate rise,  the average two-year fixed rate was at  4.24%, the highest since January 2013 (4.24%), and 1.90% above where it sat in December 2021 (2.34%).

The equivalent average five-year fixed rate of 4.33% was the highest since November 2012 (4.47%), an increase of 1.69% above the equivalent rate from December 2021 (2.64%).

Rachel Springall, finance expert at, said: "This could not come at a worse time amid a cost of living crisis when household budgets are stretched. However, failing to fix and falling onto a standard variable rate (SVR) is unwise, as the average rate has risen to its highest level in over a decade.

"Fixing for the longer-term may then be desirable, but it is unknown if interest rates will settle, and borrowers find themselves locked into a higher rate compared to new deals surfacing. Choosing the right deal is crucial and seeking advice to navigate the mortgage maze is wise."

The rise comes as the average domestic energy bill is being frozen at £2,500 a year until 2024, superseding Ofgem’s price cap that was supposed to rise to £3,549 on  October 1 and then again in January.

On Friday, Chancellor Kwasi Kwarteng will set out more details on a plan, estimated to cost up to £150bn, to help households with soaring bills.