Only one member preferred to up the rate to 1.5%.

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

Inflationary pressures in the UK and the rest of Europe have continued to intensify significantly, particularly due to Russia’s restriction of gas supplies to Europe, which led to the rise in wholesale prices and the subsequent increase in energy costs.

CPI inflation is expected to rise more than forecast in the May report, from 9.4% in June to just over 13% in 2022 Q4, and is set to remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead.

The UK is now projected to enter recession from the fourth quarter of this year.

Industry experts react to Bank of England interest rate increase

This section will be constantly updated throughout the day — check regularly for more comments from industry experts

(3:45pm)

Emma Hollingworth, distribution director at MPowered Mortgages:

“Today’s historical interest rise marks the culmination of a trend, which has been gathering pace this year in response to continuously rising inflation.

"It is expected that lenders across the board will be looking to raise lending rates in line with the new base — this may impact appetite to some extent, but the housing market has proved incredibly resilient and demand is expected to remain strong.

"What will be more important than ever now is the speed at which mortgages can be processed; time really is of the essence.

“With current economic trends likely to continue for the foreseeable future, it is key that brokers offer their clients a mortgage journey that allows them to secure a mortgage as quickly and efficiently as possible, before rates move again."

John Phillips, national operations director at Just Mortgages:

“This latest rate rise heralds the most important period for mortgage advice in a decade.

“As mortgage rates rise, feedback from our network of brokers across the country reveals that they are working overtime to secure the lowest deal for clients before rates rise further and lending criteria tightens which will be exacerbated by this latest rise.

“There is no doubt that borrowers are confident in the value of their homes, but they are becoming increasingly nervous about the impact of fuel, food and energy price rises on lenders affordability criteria and their potential to secure the loans they need at the price they want.

"Now, more than any time in the past decade, the knowledge and experience of professional mortgage brokers is crucial.”

(2:30 pm)

Ross Boyd, founder of Dashly.com:

"After this rate increase, many people coming to the end of their fixes are going to be facing a world of pain, and more rate rises are likely, as the Bank of England seeks to bring inflation to heel.

"Though this latest rate increase was expected, it's a big one and a statement that the era of ultra-low rates is now over.

"It's more important than ever that existing and prospective homeowners seek advice from independent mortgage brokers, and challenge their mortgage every day in order to make savings, as we are currently in highly uncertain and volatile times."

Gindy Mathoon, founder of Create Finance:

"With rates rising by 0.5 percentage points, we may soon start to see people downsize or sell their properties so that they can cope with the cost of living crisis.

"This could result in a wave of properties coming onto the market, which potentially could lead to property prices decreasing.

"With short-term fixed rates increasing, applicants are now increasingly opting to fix for a longer-term because of the uncertainty in the current financial climate.

"What we are also likely to see is people extending their mortgage terms just to cope with the increased cost of their mortgage payments.”

(2:15 pm)

Paresh Raja, CEO at MFS:

“At the start of the week, the Bank of England scrapped mortgage affordability tests; coupled with today’s significant hike in interest rates, we have to expect some changes in the property lending space.

"The challenge is to ensure the dual economic factors of rising interest rates and inflation do not result in inertia in the lending space.

“Flexibility from lenders is going to become so, so important in the months to come — in the current climate, using rigid tick-box methodologies will fail to serve the needs of property buyers.

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"Rather, lenders must demonstrate a little more creativity in how they assess loan applications; they must endeavour to tailor their products and services to the needs of the individual borrower; and ensure they take a view of the bigger picture as far as affordability checks are concerned.

"Due diligence and rigour will, of course, be vital, but there is still room to adapt process and keep lending.”

Nicky Stevenson, managing director at Fine & Country:

“Previous interest rate rises have failed to dampen growth in Britain’s red-hot housing market, but today’s hike will, of course, be painful for many.

“As is often the case, that pain will be felt most by those who can least afford it — new entrants to the market will continue to struggle with affordability requirements, while existing homeowners who have made spectacular gains during the boom remain in a strong position to trade-up.

“In fact, many homeowners coming off fixed-rate deals might suddenly find themselves with improved LTV brackets, which would make them eligible for more attractive financing, and help them mitigate recent increases in the base rate.

“For those on standard variable rates, the arguments in favour of switching to a fixed deal have never been more compelling; fixing rates now will allow you to insulate yourself against further rises for years to come.”

(1 pm)

Andrew Montlake, managing director at Coreco: 

“It's batten down the hatches time for Britain's mortgage holders. 

“The Bank of England has shown its teeth today with this 0.5% hike and more rate rises are almost certain this year to control runaway inflation, which will only get worse due to more energy price hikes in the autumn. 

“The worry is that these rate rises are doing little to help and the higher we go, the more borrowers will start to hurt and struggle with the additional burden on top of the ever-growing cost of living crisis. 

“We have already seen lenders putting up their rates again this week in preparation, but borrowers should now be prepared for some further changes from lenders with little notice. 

“For those looking at buying, quick decisions need to be made before lenders hike their offerings, while those looking at remortgaging should be looking at locking into a rate six months before their existing product expires."

Nigel Green, CEO at deVere Group:

“Due to the Bank of England passively standing on the sidelines for far too long last year, when prices were already starting to surge, they are now feeling the need to aggressively rate hikes, but it’s too hard, too late.

“Now, just as the UK is nose-diving into a recession, they are slamming on the brakes, which can be expected to make the downturn of Britain’s consumer-driven economy worse, and last for longer.

“The Bank of England’s hike is harmful to the economy and piles on the pain for people and businesses across the country.”

Paul McGerrigan, CEO at Loan.co.uk:

“Given that much of the origin of the stimulus of inflation — the war in Ukraine, the post covid recovery and Brexit — is beyond the bank’s control, this will just drive more challenge in the socio-economic mix and continue to tighten the vice on already tight household budgets. 

“If rises continue at the same rate as we've seen in past months, we could expect to see rates hit 3% by spring — this leaves a significant challenge for Boris Johnson’s successor, who will quickly need to get to grips on the nation’s finances.

“In the backdrop, though, there are many who will struggle, and those on fixed and tracker mortgages will want urgent reviews in order to lock in a dependable rate, so now is the time for brokers to throw their arms round clients and be proactive in organising reviews.”

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

“We know that the Bank of England has very few tools in its box when it comes to controlling inflation and reducing the risk of recession, so a rise in interest rates seemed inevitable. 

“Controlling inflation without compromising economic growth is the trick the bank is trying to pull off.

“Those whose fixed-rate mortgages are ending soon will be taking nervous looks over their shoulders with regard to the likelihood of further uplifts.”

Anna Clare Harper, director at IMMO:

“Higher interest rates most significantly impact those borrowers on variable-rate mortgages.

“It’s likely that as a knock-on effect, these property owners will become more willing to sell, and at lower prices, boosting liquidity and supply in the housing market 

“However, this is expected to be a relatively short-term move, creating a temporary shift in negotiating power from sellers to buyers for the next 18 to 24 months, rather than forever.

“As ever, cash buyers will have the upper hand, but they will also now have a higher cost of holding cash.”