The Bank of England has hiked its interest rates from 0.5% to 0.75%, only the second rise since 2009.

Members of the nine-strong Monetary Policy Committee (MPC) voted 9-0 in favour of the move.

“It feels like there is an element of the Bank of England reloading the interest rate gun in case we need an emergency Brexit related cut next year," AJ Bell chief investment officer Kevin Doran said.

"The UK economy is hardly charging ahead but, with interest rates at historic lows, Mark Carney and Co know that they have little room for manoeuvre should there be a stumble as we head towards the 29 March Brexit deadline next year. Today’s 0.25% increase at least reloads one bullet.

“Whilst the increase is an improvement for savers, with inflation still being fuelled by a rising oil price and weak sterling it is little help for the vast swathes people whose purchasing power has been eroded by inflation comfortably outstripping the meagre interest earned on their savings. Let’s hope banks are quick to pass on the increase to at least provide some help to savers although unfortunately this often doesn’t materialise.

“It will also not be welcomed by the vast numbers of UK borrowers, many of whom will only ever have known rock bottom interest rates and hence might be vulnerable to increases. From an investment perspective a base rate of 0.75% is still exceptionally accommodative and is likely to continue to stoke asset prices as investors look for a real rate of return above inflation, something that is scarce in cash or government bonds.”

Commenting on how it will affect the mortgage market, Vida Homeloans sales and marketing director Guy Batchelor added: “More than a third of homeowners are still on a standard variable rate mortgage (SVR) according to research by L&C Mortgages and borrowers on this type of mortgage have been enjoying a low interest environment for nearly a decade, so this interest rate rise represents a significant change in landscape. This rate rise will not cause a drastic increase in monthly repayments but could be a signal of things to come so we may see some buy to let properties coming back onto the market which would be good news for first-time buyers.

“Those borrowers who are on SVR should contact their mortgage broker for whole of market advice, as this rate rise could make certain customer segments more vulnerable. For example, any significant movements upwards in base rate may cause some downsizing activity amongst older borrowers. They should also take professional advice about their options.”

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