Those members in the minority preferred to up the rate to 1.5%.

It is the fifth consecutive increase since the bank cut the rate to 0.1% two years ago as a result of the coronavirus pandemic.

This comes as CPI inflation rose to 9% in the 12 months to April 2022 — significantly higher than the MPC’s 2% target.

CPI inflation is expected to be over 9% during the next few months and to rise to slightly above 11% in October — a reflection of the higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.

Industry experts react to Bank of England interest rate increase

Adrian Anderson, director at Anderson Harris:

“The interest rate hike today to 1.25% is no surprise — inflation is running red hot and this interest rate rise means higher borrowing costs for mortgages, credit cards and other loans.

“The question I keep on being asked is, ‘When will these rate hikes stop?’ and I don't think the MPC know the answer to this question.

“The Bank of England is playing catch up — at the beginning of the inflation crisis, we were told this was a temporary issue due to supply chain problems, and this is clearly not the case.

“We are encouraging homeowners to remortgage as early as they can and are contacting our clients six months in advance rather than the usual three-four months before a rate renewal due date.”

Mark Harris, chief executive at SPF Private Clients:

“It is no surprise that the bank has raised the base rate again.

“Those who are on a variable-rate mortgage and are worried about further rising rates should consider opting for a fixed-rate deal.

“Rates can be reserved up to six months before you need them, so it may be worth borrowers securing a deal now, which can be moved onto when their existing deal comes to an end.”

Jeremy Leaf, north London estate agent and former RICS residential chairman:

“The interest rate rise will have more of an effect on confidence to take on debt and disproportionately will impact lower-income households who are less able to dip into savings to make up a shortfall.

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“Affordability calculations may be compromised, which could affect borrowing potential as well — the net result will slow demand and the pace of house price growth, but won’t reduce prices, bearing in mind the continuing huge imbalance between supply and demand.”

Richard Pike, sales and marketing director at Phoebus Software:

“Today’s increase is one that most people were expecting and, hopefully, preparing for.

“In this rising inflation and interest environment, even though the increments are small, real wages are reportedly already struggling to keep pace, so it is inevitable that some households will start to feel the pinch.

“It is encouraging therefore, to read that the FCA has today reminded lenders of their responsibility to provide help to customers struggling with payments — however, this does, of course, mean that lenders will need the resources to identify vulnerable borrowers at an early stage to be able to offer the help that is required.”

Simon Leadbetter, global CEO at Fine & Country:

“The Bank of England has resisted pressure for a more aggressive hike and opted instead to maintain a steady-handed approach.

“It is likely that the overall impact of this rise on the housing market will be diluted by the levels of demand we are currently seeing, and different demographics will be affected disproportionately.

“Existing homeowners remain in a strong position to trade up, given the gains they have made in the boom, and current evidence suggests that previous hikes have done little to diminish their appetite for grander homes.

“Meanwhile struggling first-time buyers, who already face the greatest hurdles in the housing market, may find themselves trapped in expensive rentals for even longer as their affordability woes continue to worsen.

“With the economy already edging towards recession, many will be wondering whether further monetary tightening may create more problems than it ends up solving.”

Jatin Ondhia, CEO at Shojin:

“The question right now is how much higher will interest rates go?

"Given the current macroeconomic challenges, it is imperative that investors monitor how different markets and assets are faring, rethinking their strategies accordingly.

“Diversification and agility could prove key in navigating this testing climate, and it should be expected that most resilient markets, such as real estate, will continue to attract investor demand, particularly among those seeking relatively safe options that stand a chance of keeping pace with inflation."