Interest rates are high enough to dampen demand and cause real financial pain for millions of households

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Before we get on to the Bank of England’s decision today we urgently need to clear something up. There’s a misconception which sometimes floats around at times like this, that while interest rates are on the rise, the fact that they’re so low compared with historical standards means there’s no reason to be concerned.

You’ve probably heard this argument while talking to relatives or colleagues. Maybe you’ve even trotted it out yourself.

Even after today’s 0.5% increase – the joint-biggest since Bank of England independence in 1997 – interest rates are just 2.25%. That is less than half of what used to be considered the “neutral” level for interest rates – 5%.

It is barely a fraction of the levels interest rates hit in the 1980s and 1990s, when they scaled double-digit peaks.

Surely only a snowflake would fret about interest rates hitting 4.75%, as they’re expected to do by next year?

And in one respect that’s quite right. Looking solely at the headline interest rate itself, it is indeed far, far lower than it has been for most of history.

But the problem is that the interest rate alone gives you no sense of how affordable mortgages are. This is not just a small point; it’s everything. And here’s where things get interesting, which is to say scary.

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As any homeowner knows, your ability to repay your mortgage depends on all sorts of factors alongside the interest rate itself.

It depends on how much money you’ve borrowed. It depends on how much you’re earning and how much of that money is being eaten up by other non-discretionary things like energy bills.