THE Bank of England has hiked interest rates to 0.5 per cent in the first rise for over a decade and signalled more increases are on the way as it looks to cool surging inflation.
Policy-makers on the Bank's nine-strong Monetary Policy Committee (MPC) voted 7-2 in favour of the quarter point rise, which marks the first rates increase since July 2007.
The move comes as the Bank looks to dampen Brexit-fuelled inflation, which it predicts will now peak at around 3.2 per cent this autumn.
The Bank's quarterly inflation report also suggested two more rate hikes are likely over the next three years to return inflation back to its 2 per cent target, which could see rates hit 1 per cent by the end of 2020.
The milestone rate hike comes as the Bank cut its forecast for growth to 1.6 per cent for 2017 from the 1.7 per cent previously predicted, but held forecasts at 1.6 per cent for 2018 and 1.7 per cent for 2019.
Millions of borrowers on variable rate deals will be impacted by the rates decision, which will add around £15 a month to the cost of the average mortgage, while it will offer some relief to savers hit by surging inflation and negligible returns.
But a quarter point rise will only reverse the emergency cut seen in the aftermath of the Brexit vote shock in 2016 as the Bank sought to head off turmoil in the economy.
And the Bank said the impact on mortgage borrowers would be modest and gradual, with around 60 per cent on fixed rate deals.
Yorkshire Building Society issued the following statement in the light of the Bank of England's decision: "The Yorkshire Building Society Group has today announced it will give a boost to its savers by adding the full bank rate increase of 0.25 per cent to all variable rate accounts.
"Borrowers on a Yorkshire, Chelsea or Norwich & Peterborough standard variable rate (SVR) mortgage will see their rate increase by 0.25 per cent to 4.99 per cent.
"However the group is reducing its Accord Mortgages SVR from 5.34 per cent to 4.99 per cent meaning borrowers on its SVR will see a reduction in monthly repayments."
Mike Regnier, chief executive at Yorkshire Building Society, said: "It has been a tough few years for savers, so we're delighted to be able to pass on the full bank rate increase.
"With no external shareholders to satisfy we have protected savers as far as possible during the extended period of a record low bank rate, maintaining an average interest rate on our accounts which has been consistently higher than the market average.
"Our decision today to pass on the full increase to variable rate account holders reflects our mutual ethos of putting our members first."
TSB issued the following statement following the Bank of England's announcement: "Today the Bank of England has decided to increase the base rate by 0.25 per cent to 0.50 per cent - unwinding its 0.25 per cent rate cut made last summer.
"TSB will also be unwinding the changes made to the interest rates on its variable rate savings, mortgage and base rate linked credit card accounts - putting customers back into the position they were at in August 2016 before the Bank of England reduced rates by 0.25 per cent.
"Interest rates on TSB's variable rate mortgage and base rate linked credit card accounts will increase by 0.25 per cent.
"Interest rates on variable rate savings accounts will increase by 0.15 per cent. In August 2016, TSB protected savers from the full base rate decrease by only reducing interest rates by 0.15 per cent.
"TSB partners are ready and available to help savers and borrowers understand the impact these changes will have, to answer any questions and to guide our customers through this change."
Jatin Patel, TSB's product director, said: "It's been over a decade since base rates have increased and customers will have many questions about how the increase will affect them.
"We will be putting our customers' variable rate mortgages and savings back to the position they were at before the Bank of England reduced rates last year.
"People may find it daunting to navigate the changes without support, which is why TSB partners are on hand to help.
"We have great partners in our branches and on our customer service team to guide people through this change."
