The Bank of England raised its main interest rate for the first time since 2007, before the global financial crisis, it announced Thursday as it tackles Brexit-fuelled inflation. 'Over the last year, two thirds of first time buyers have opted to fix their rate for up to two years, with a further one in four opting to fix for two to five years, ' she said.
The Bank is looking to cool surging inflation, which has been sent higher by sharp falls in the pound since the Brexit vote. Approximately 8,1 million households service a mortgage in the United Kingdom, although approximately half have a fixed rate contract.
As well as numerous country's 45 million savers, anyone considering buying an annuity for their pension will also see better deals.
This could hit some home-owners hard, given the popularity of variable rate mortgages in the United Kingdom, meaning the impact of a rate hike can be felt very quickly by households, which are already highly indebted.
The Bank estimates that nearly two million mortgage holders have not experienced an interest rate rise since taking out a mortgage.
If you have a £50,000 balance on your mortgage, the average now monthly repayment will be £225 - which will go up by £6 with the rise.
"The MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target", the meeting minutes said.
However, it should boost savers via higher rates of return. "All members agree that any future increases. would be expected to be at a gradual pace and to a limited extent", the BoE said in a summary of its decision.
Sterling was also trading 0.4 percent up against the euro on Friday, after suffering its worst one-day drop on Thursday against the single currency since a "flash crash" on October 7, 2016, when a sudden plunge briefly shaved a tenth off the pound's value. Sterling dropped more than a cent against the two currencies to $1.3130 and €1.1280 respectively.
Kathleen Brooks, research director at City Index, said that the latest move was likely to be "one and done" rather than the start of a rate hiking cycle.
Although the psychological impact of the Bank of England's rise may be unhelpful in terms of wider economic confidence, today's increase is unlikely to impact heavily on the housing market, experts say. "And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures". The two dissenters thought a hike wasn't warranted yet, and the majority isn't exactly bullish on the prospects for the British economy.
Business bodies said the rise was expected, but warned that companies could be hit if further increase came too soon.
He says the share of outstanding mortgages on variable rates - and which are therefore likely to see an increase in payments if the base rate is increased - has fallen to a record low of about 40 per cent, well down from a peak of about 70 per cent in 2001. While inflation hit 3% in September, wage growth was only 2.1%.