The Bank of England has raised interest rates for the tenth time in a row lumping further pressure on mortgage borrowers.

Decision makers on the Bank’s Monetary Policy Committee (MPC) opted to hike the base rate from 3.5% to 4%, to help bring down double-digit inflation.

The Bank said that the UK is still headed for a recession, but stressed that the economic downturn could be shallower and shorter than previously expected.

Peak-to-trough gross domestic product (GDP) is set to shrink by 1%, from around 3% in an earlier forecast.

This is because wholesale energy prices have fallen significantly since the MPC produced its last forecast, in November, and inflation has begun to fall from its peak last year.

The UK will suffer a recession of five consecutive quarters, starting in the first three months of 2023.

But the decline will be much softer than in previous recessions, such as during the 2008 financial crisis. A recession is defined as at least two consecutive quarters of falling output.

GDP is expected to fall by 0.5% over 2023, and by 0.25% in 2024, before picking up to almost 1% by 2025.