The Bank of England has announced it is raising interest rates by 0.75 percentage points to 3% - the largest single hike since the 1980s.

The Bank warned the  UK could be on course for its longest recession since reliable records began a century ago as it announced the decision.

It has said further interest rate hikes could be required to tame runaway inflation, as it implemented the biggest single increase since 1989.

Jeremy Hunt faced calls to come to the Commons or give a press conference to explain how mortgage-holders will be helped following ahead of the hike in interest rates.

Liberal Democrat Treasury spokeswoman Sarah Olney said: “The Chancellor must address the country immediately after the rate rise decision to spell out a plan to save homeowners on the brink.

“He should either come to Parliament or hold a press conference to announce support for families facing mortgage bill rises worth hundreds of pounds a month.

“Hard-working families are being left to pay the price for weeks of Conservative chaos. People are desperately worried about how they are going to pay these frightening mortgage payments after tomorrow.

“The Government cannot hide away, especially after their long list of economic failures.”

How does increasing interest rates reduce inflation?

But how does rising interest rates help tackle inflation?

The Bank of England will take steps to keep inflation low and stable known as monetary policy.

Higher interest rates will make it more expensive for people to borrow money encouraging the public to save rather than borrow meaning people will tend to spend less.

As a result, people are expected to spend less on goods and services overall meaning the prices of those goods rise.

How do interest rates affect me?

Interest rates might seem small but they can have a very big impact on finances. 

Meaning that it's important to keep an eye on whether they rise, fall or stay the same.

READ MORE: What does the rise in interest rates mean for first-time buyers?

Currently, with interest rates continuing to rise, those that borrow such as people on mortgages could see an increase in the rate they pay. 

Meaning that the predicted interest rise of 0.75% could see buyers face an increased monthly payment, suggesting that mortgage payments could make up more than 40% of a homeowner's gross salary.

However, if you typically save money, you could see the bank pay you more as interest rates push up the amount they pay you back.