How will the interest rate rise affect my mortgage and savings?

View of the City of London

In its statement accompanying the decision to return rates to their pre-Brexit referendum level of 0.5 percent from a record low 0.25 percent, the Bank said any future increases will be "very gradual" in pace and to a "limited" extent.

Around eight million Britons have never seen an interest rates rise in their adult lives, experts say, with rates languishing at rock-bottom lows after the country fell into a deep recession.

The pound fell on the news of the rate hike by 1.3% against the USA dollar and closed at$1.3067 Thursday.

The pound was given a brief further boost by US labour market data indicating that a slightly lower-than-expected number of jobs were added in October.

"On the borrowing side, looking at the housing market, many mortgage holders are now on fixed rates and so the interest they pay on their borrowing won't change immediately". This could suggest market pricing was either on-the-money or overly optimistic. The economy has proven more resilient than feared, but has clearly weakened.

But its talk of two further increases to take the base rate to 1%, even if phased over two to three years, sounds premature give the continuing uncertainty over the outcome of Brexit - and the fact that a generation of borrowers has grown up with no experience of anything other than rock-bottom rates. Sterling could be volatile until a new consensus emerges.

That may go some way to help counteract Mr Carney's reputation - in the words of one British politician - of being an "unreliable boyfriend" who did not live up to previous guidance about higher rates.

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Concerns over above target inflation and the potential for Brexit-related factors to push this higher in the coming months are credited with pushing the BoE over the edge and into the first move Thursday. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

"The combination of inflation stabilising, real income growth improving and the likelihood of a transition deal leave us unconvinced that the rates market is accurately priced, " warns Derek Halpenny, European head of global markets research at MUFG.

"We estimate one in 10 of our clients with a mortgage will end up with a deficit budget, and some households will need support to adjust", said Mike O'Connor.

The two Monetary Policy Committee members who voted to keep rates steady, deputy governors Jon Cunliffe and Dave Ramsden, said wage growth was too weak to justify a rate rise now.

"Admittedly, it did not suggest that this is merely a "one and done", says Paul Hollingsworth, senior United Kingdom economist at Capital Economics. Some lenders, such as HSBC and Yorkshire Bank, will pass on the rate rise with immediate effect.

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