The Bank of England has raised interest rates from the current 0.25% to 0.5%, representing the first increase since July 2007.

The MPC voted by a majority of 7-2

The increase in rates is expected to hit the 3.7 million households with standard variable rate or tracker mortgages.

However, the rise will benefit a large share of the 45 million savers who are likely to enjoy higher returns from accounts that pay variable interest rates.

At the time of press, the pound had lost half a cent against the US dollar to $1.319.

In today's press conference, BoE governor Mark Carney said: "In many respects today's decision is straightforward.

"With the economy growing at rates above its speed limit, inflation is unlikely to return to the 2% target without some increase in interest rates. Of course these aren't normal times. Brexit will redefine the UK's relationship with our largest trade and investment partner and it will have consequences for the movement of goods, services, people and
capital as well as the real incomes of UK households.

"The MPC has repeatedly emphasised that monetary policy cannot prevent either the necessary real adjustment to new trading arrangements or the weaker real income growth likely to accompany that adjustment. We can however support the economy during the adjustment process. In such exceptional circumstances, the MPC is required to balance any trade off between the speed at which we return inflation sustainably to target with the support the monetary policy provides to jobs and activity."

Insignis Cash Solutions CEO Giles Hutson added: “The Bank of England’s decision to hike rates for the first time in 10 years is a healthy reminder that low interest rates can’t last forever. The increase of 0.25% will start to release the UK from its unsustainable low rate environment, and help avoid a consumer finance bubble.

"Increasing rates now remind society that a low rate climate is not indefinite. This will support better long term financial planning, especially when it comes to deciding how much debt a family or company can afford to take on.

“The benefits of a low rate climate had a limited life and couldn’t last forever. Savers’ cash deposit returns have been obliterated. That said, this is one small step to normalisation and a single rate rise of 0.25% won’t revolutionise saving in the short term. We need to see two major shifts to boost returns in any meaningful way; continued increased competition in the banking market and overcoming the inertia that holds savers back from managing their cash more actively.”

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