For the first time in almost a decade the Bank of England has raised interest rates from their financial crisis lows. The Bank's monetary policy committee increased the cost of borrowing from 0.5% to 0.75%. For nine and a half years, the rate was at or below 0.5%.

According to some economists, employment growth, above-target inflation and a relatively robust economy was behind the decision. However, some have suggested that the economy is not strong enough to withstand higher interest rates.

The Bank of England

Campaigners are also concerned that some families will struggle to pay their mortgages following the increase with levels of household debt rising in recent years. However, the proportion of families on floating rate mortgages, which will be affected immediately, is now at the lowest level in recorded history.

Experts say that the higher rates will allow the Bank more room for manoeuvre if there is a future financial crisis, or in the event of a hard Brexit.

Robert Gardner, chief economist at Nationwide, said: “While the impact for most borrowers is likely to be modest, it’s important to note that household budgets have been under pressure for some time because wages have not been rising as fast as the cost of living.”

Britain has lagged behind most other rich economies since the 2016 vote to leave the European Union. But the Bank of England has said it needs to raise rates because even Britain’s slow growth is likely to generate too much inflation.