Mortgage costs rose in minutes today as young homeowners faced the first rate rise of their adult lives.

The Bank of England raised interest rates for the first time in a decade at noon, lifting the cost of borrowing from 0.25 per cent to 0.5 per cent.

Governor Mark Carney signalled more increases could follow as a decade of ultra-cheap lending after the financial crisis finally began to end.

The fact rates have not risen in 10 years means eight million Britons - many of whom have become first time buyers in the past decade - have not experienced a rate rise in their adult lives.

Millions of homeowners with variable rate mortgages are facing higher monthly payments.

High street banks immediately began announcing increases to their rates on mortgages.

But interest earnings on savings accounts are still to be reviewed by several major banks, including HSBC, Barclays and the Royal Bank of Scotland.

WHAT IS YOUR BANK DOING TO RATES? Yorkshire Building Society: All variable rate savings boosted by 0.25%. Yorkshire, Chelsea or Norwich & Peterborough standard variable rate (SVR) mortgage will see their rate increase by 0.25% to 4.99%. Accord Mortgages SVR from 5.34% to 4.99%, meaning borrowers on its SVR will see a reduction in monthly repayments. TSB: Variable rates reset to August 2016 when the last cut was implemented. Savings rates are increased 0.15% and variable mortgages increased by 0.25%. HSBC: Tracker mortgages up 0.25% from Friday. Savings accounts are under review. Nationwide Building Society: Savings rates increased by 0.25%. Mortgage rates are increase - the society's base mortgage rate is now 2.5% and standard mortgage rate is 3.99%. Barclays: Mortgages and savings accounts are now under review. Lloyds/Halifax: Tracker mortgages will go up 0.25% from December 1. RBS/NatWest: Base-rate linked mortgages are increased by 0.25% to 0.5%. Other variable rate products are under review. Santander: All variable rate products are under review. Skipton: Variable mortgages will be held at current rates while LISA savers will get a 0.25 per cent boost to their rate. Advertisement

The Bank of England today increased interest rates to 0.5 per cent in the first rise for a decade. The new rate (show far right) reverses a cut made last summer after the EU referendum and still leaves rates at near record lows

Governor Mark Carney (pictured today at the Bank of England) voted with the majority on the nine-member committee at today's vote after trailing today's rise in interviews last month

The last time the Bank of England increased rates first time buyers Tom Woodward and Rosie Dixey (pictured), were aged 15 and 13

After the rate rise was announced, the pound was down 1.4per cent against the dollar (left) and 1.78 per cent against the euro (right)

The increase in rates is a major move by the Bank to try and peg back fast-rising inflation.

Prices have been outstripping wages as inflation hit 3 per cent, squeezing household incomes. The Bank of England's job is to keep inflation at 2 per cent.

CARNEY BLAMES INTEREST RATE RISE ON BREXIT Bank of England chief Mark Carney today warned uncertainty over Brexit is to blame for the UK's first interest rate rise in a decade. He said the decision to quit the bloc is having a 'noticeable impact on the UK's economic outlook.' He added: 'In many respects the decision today is straightforward: with inflation high, slack disappearing and the economy growing at rates above its speed limit, inflation is unlikely to return to the 2 per cent target without some increase in interest rates. 'Of course, these are not normal times. Brexit will redefine the UK's relationship with our largest trade and investment partner.' Warning of Brexit turbulence ahead, the Bank said: 'Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years. 'It can, however, support the economy during the adjustment process.' Advertisement

If the decision gets inflation falling toward target, it will help Chancellor Philip Hammond plan public spending at his Budget later this month.

The pound fell against the euro and the dollar ahead of the decision, which had been widely predicted, and fell further after the announcement.

Speaking at the Bank today, Mr Carney said the move to hike rates was driven by the need to bring inflation down to target.

He said: 'It's not so much where inflation is now, but where it's going that concerns us.'

He added: 'In many respects the decision today is straightforward: with inflation high, slack disappearing and the economy growing at rates above its speed limit, inflation is unlikely to return to the 2 per cent target without some increase in interest rates.

'Of course, these are not normal times. Brexit will redefine the UK's relationship with our largest trade and investment partner.'

The Governor said: 'With unemployment at a 42-year low, inflation running above target and growth just above its new, lower speed limit, the time has come to ease our foot off the accelerator.'

In a statement announcing the decision, the Monetary Policy Committee said its forecast was still that inflation was at its peak of 3 per cent and that economic growth would be 'modest'.

The Bank also warned of Brexit turbulence ahead.

It said: 'Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years.

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'It can, however, support the economy during the adjustment process.'

In a statement, the Yorkshire Building Society said it was increasing savings rates by 0.25 per cent.

It said 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.

Accord Mortgage holders will see a cut in repayments as the variable rate is cut from 5.34 per cent to 4.99 per cent in light of today's decision.

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.

Yorkshire Building Society chief executive Mike Regnier announced most mortgages and savings products would see higher rates. TSB product director Jatin Patel said his bank would match the move

Yorkshire Building Society and TSB (pictured is the Shrewsbury branch) were among the first to announce increases to both mortgage and saving rates within minutes of the decision today

'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.'

HOW THE BANK'S MPC VOTED The Monetary Policy Committee voted seven votes to two in favour of increasing interest rates today. YES Governor Mark Carney, Ben Broadbent, Andrew Haldane, Ian McCafferty, Michael Saunders, Silvana Tenreyro and Gertjan Vlieghe NO Jon Cunliffe and Dave Ramsden Advertisement

TSB followed suit, returning interest rates on savings, mortgage and base rate linked credit card accounts - putting customers back into the position they were at in August 2016.

It said interest rates on its variable rate mortgage and base rate linked credit card accounts will increase by 0.25 per cent.

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.'

If the decision gets inflation falling toward target, it will help Chancellor Philip Hammond (pictured in Downing Street yesterday) plan public spending at his Budget later this month

A statement from HSBC said: 'As tracker mortgages are directly linked to the base rate, these will go up in line with base rate as of tomorrow.

'On average, those with an HSBC tracker mortgage with £100,000 balance would see a monthly increase of £12 per month and an increase of £24 for those with a £200,000 outstanding balance.'

A Barclays spokesman said: 'Following the decision by the Bank of England to increase its base rate, we are currently reviewing our rates for customers and clients who borrow and save with Barclays, and we will be able to provide more information in due course.'

RBS/Natwest said: 'Existing customers with fixed-rate products will not see a change in their rate during their fixed-rate period.

'We are currently reviewing whether we will make any changes to variable-rate products and will provide an update in the near future.'

'We've never seen a rate rise' Tom and Rosie are buying their first home Today's base rate rise was the first many have seen as homeowners. The last time there was a rise, Tom Woodward, and Rosie Dixey, were aged 15 and 13. Today, the first-time buyers have managed to secure a rock bottom mortgage rate at 2.19 per cent, having worked hard to save a 10 per cent deposit of £14,000 since 2012. Tom, now 25, who works for JCB, and Rosie, now 23, a solicitor, are in the middle of buying their first home in Ashbourne, Derbyshire, with a mortgage from Principality Building Society. But Tom knows they've been lucky not to have been part of a generation that has seen their mortgage rate go up - and the couple worry that if rates rise quickly they may struggle. 'People our age have never seen interest rates as high as they were in 2007 – at the time we wouldn't even have been aware of what interest rates were and what they meant,' he says. 'Now there's quite a big risk all of a sudden that mortgage rates might start to go up and people could find themselves in difficulty.' Despite this concern, Tom and Rosie opted to take a two-year fixed rate rather than a longer term fix, which would have offered a bit more security for them. 'We weren't sure how long we'd be in this house,' explains Tom. 'We got mortgage advice from London & Country, and they suggested that the two-year made more sense if we thought we might need to move. We didn't want to be tied down for longer than two years.' But the decision not to fix for longer is causing Tom some worry. 'We are slightly concerned as it's clear the Bank of England is looking to raise the base rate. 'It's been at record lows for so long but things are going up in the future. At the end of our fix, that could be an issue as we might see an increase in our monthly payments which could make things difficult.' By Sarah Davidson Advertisement

Shadow Chancellor John McDonnell said: 'Today's decision by the Bank of England reflects the deep pessimism of many economists about the underlying state of the British economy after seven years of Tory policies, with productivity forecasts also likely to be downgraded by the Office for Budget Responsibility later this month.

'The Tories' failure means real wages are lower today than in 2010 and still falling. The government must bring forward the investment needed to secure well-paid jobs, and follow Labour's call for a £10/hour Real Living Wage to end poverty pay.'

Liberal Democrat leader Sir Vince Cable said: 'This marks a significant change of direction towards a world of higher interest rates after almost a decade on the life support of ultra-cheap money.

'The move comes amid growing signs of economic weakness, particularly the uncertainty of Brexit. This will present a serious problem as many individuals, families and companies rely increasingly on borrowing to get by.

'We are already seeing signs that consumers are losing confidence. If consumers get the idea that interest rates are going to rise further, pushing up the cost of servicing their debts, this will kick one of the few parts of the economy that was working.'

Shadow chancellor John McDonnell said the rate rise reflected 'pessimism' among experts about the state of the economy while Lib Dem leader Sir Vince Cable welcomed the start of weaning the Britain off the 'life support of ultra-cheap money'

Scott Corfe, Chief Economist as the Social Market Foundation, says:

'This rate rise is unlikely to have a significant effect on UK households. We're looking at a modest increase in borrowing costs which will take time to feed through into household finances.

'With about 60 per cent of mortgage-holders on fixed rate deals, the majority will see no immediate change in housing costs as a result of today's news.

'For some, it will take several years before they see any change in mortgage costs.

'Critically, today's rate rise is unlikely to be the first of many over the next few years. With the UK economy set to be held back by Brexit uncertainty and lacklustre productivity, rate rises are likely to be very modest and gradual.

'I would be surprised to see the Bank Rate rise above 2.5 per cent by 2020.

'Indeed, the Bank of England could cut rates again in the event of an economic downturn – something well within the realms of possibility over the coming years.'

Rates plunged from around 5 per cent in late 2007 to historic lows of 0.5 per cent as the financial crisis deepened. Rates were cut to a new low of 0.25 per cent last summer in the aftermath of the Brexit vote amid fears of an economic slump.

Bank of England Governor Mark Carney trailed today's rise when he suggested last month the time was approaching when it may be 'appropriate' to increase rates in an effort to stem Brexit-fuelled inflation.

'We're worried that interest rates could keep rising' Lewis and Sarah have just locked in for two years to help them budget The concern for many homeowners is not the first base rate rise that we have now seen, but what happens if interest rates keep rising. The worry as to whether they will struggle to afford their mortgages if they do is encouraging large numbers to fix rates now. Lewis Sheppard is 25 and a self-employed personal trainer and gym owner. He and his wife Sarah, also 25, a finance company administrator, have just upgraded from their first home to a detached home worth £420,000 in Henlow, in Bedfordshire. Because Lewis works for himself and can't always predict what income he'll see from month to month, the couple locked into a two-year fixed rate mortgage from Clydesdale Bank at 1.69 per cent. Worries that rates could keep rising and the need to stick to their budget meant they chose a fixed rate. 'We definitely knew we wanted a fixed rate to give us the security on our monthly payments,' says Sarah. 'Because my husband is self-employed we really need to know what we'll need to budget for and we both definitely think that interest rates are going to go up over the next year to 18 months. 'I think that fear is causing people to be worried about their financial situations but we think two years on a fixed rate gives us enough time to plan our budget if rates do go up before we need to remortgage. 'You can't live in fear and you can't predict the future.' By Sarah Davidson Advertisement

Edward Park, investment director at investment manager Brooks Macdonald, expects the Bank to pause after the today's hike.

Speaking before the decision was announced, he said: 'We believe that any hike in November will reflect a reversal of the post-Brexit stimulus rather than the beginning of a short term series of hikes.

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'With the UK consumer still heavily indebted, via both mortgages and credit, at the same time as there is a real wage squeeze, we don't think the near term outlook warrants materially higher rates.'

But the Bank of England is tasked with returning inflation back to its 2 per cent target since the Brexit-hit pound has sent prices racing higher and economists are pencilling in as many as three hikes to 1 per cent by the end of 2019 to bring it back from the 3 per cent recorded in September.

The economy has performed better than feared since the EU referendum despite the pound's plunge, with growth edging up to 0.4 per cent in the third quarter from 0.3 per cent in the previous three months, according to last week's official figures.

This has given the Bank room to consider raising rates, although a number of members on the MPC have voiced fears over uncertainty ahead amid Brexit negotiations.

A rate hike also comes at a painful time for Britons, who are being squeezed by paltry wage growth and sharply rising inflation.

Economist Philip Shaw at Investec said while near-zero interest rates are 'not healthy', there are concerns over the timing of a hike.

He said: 'Household budgets are under pressure and higher interest rates may bring about a further reaction by consumers, slowing the economy further.

'Activity is also vulnerable to a retracement of corporate activity on the back of Brexit-related uncertainty.'

He added the outlook for rates was 'very uncertain'.

Howard Archer, chief economic adviser to the EY Item Club, said the Bank may 'sit tight for an extended period after an initial hike to see how consumers and businesses respond'.

He does not believe rates will rise again until 'at least' later 2018, although some economists said the next hike could come as early as February if economic growth remains stable.

A rate increase from 0.25 per cent to 0.5 per cent would reverse a cut implemented by the Bank last August in the aftermath of the EU referendum

'I wanted a rate rise today' Margaret Laker is fed up with low rates Savers have suffered almost a decade of low returns as rates were slashed to combat the financial crisis - and will now celebrate today's rate rise. Margaret Laker, 76, from Epsom, Surrey, is a retired accountant. She is fed-up of the low savings rates on offer from providers and believes interest rates need to start moving higher in the coming years. She said: 'I wanted a rate rise today as I have found it in an increasing struggle to find a decent return on my savings and I'm pleased it has happened. 'It's become harder to hunt out good rates in recent times and find providers that I trust to keep my cash safe, with many names I don't recognise. 'I'd like to see the big high street banks start to offer better rates instead of paying large sums to their top men while having an accounts paying 0.01 per cent. 'I would definitely like to see the base rate continue to rise in the coming years.' As a result of her struggle to find a decent return, she turned to the Savings Champion service, which offers a 'concierge' service to manage people's accounts and track down the best rates. By Lee Boyce, This is Money Advertisement

Why has the Bank of England raised interest rates, what happens next and how high will they go?

The Bank of England finally raised interest rates today, more than a decade after the last upward move.

The rise to 0.5 per cent came as the Bank sought to dampen inflation, but is controversial as it could slow the economy.

The rate rise will lift the cost of mortgages, but should spell some better news for savers. What's important, however, is what happens next and whether interest rates continue to rise.

We explain why the Bank raised rates and what you need to know.

The Bank of England has finally raised interest rates but the crucial question is what next?

Why has the Bank raised rates?

The Bank of England raised interest rates today in response to the higher level of inflation seen over the past year.

The Monetary Policy Committee voted by 7 to 2 to raise base rate from 0.25 per cent to 0.5 per cent. That reverses the emergency cut seen in August 2016, made after the Brexit vote.

So why has the Bank raised rates now?

The most recent consumer prices index inflation figure was 3 per cent for September and the rise in the cost of living has been running above the target of 2 per cent for most of this year.

The rate-setting Monetary Policy Committee's remit is to keep inflation to that 2 per cent target level and promote financial stability.

This puts the Bank in a tricky position at the moment.

Typically, with inflation running above target it would be expected to raise interest rates, which are used as a tool to dampen things down.

But the bank's economists are also worried about Brexit and the negotiations around it sapping confidence and slowing the economy – and recent data has been ok but not great.

Added to the mix is that much of the inflationary effect seen this year has been imported, due to the fall in the value of the pound since the Brexit vote. As long as the pound doesn't take another major tumble, inflation is expected to peak soon at about 3.2 per cent and then tail off.

Raising interest rates will make little difference in this scenario, but the Bank has taken the decision to move and be seen to be doing something about inflation.

The Bank of England's chart above shows expectations for interest rate rises in the US, UK and eurozone. The dotted lines are market expectations in August, while the solid lines are now.

Will interest rates keep rising?

They key question on interest rates is will they keep rising?

The rise takes base rate back up to 0.5 per cent from the 0.25 per cent that it was cut to following the UK's referendum vote to leave the EU. At the time, the Bank depicted that cut as an emergency measure.

The economy has fared better than expected since the Brexit vote and businesses and homeowners are unlikely to struggle too much with a 0.5 per cent base rate that they had survived with since it was first cut to that level in March 2009, in response to the financial crisis.

If rates keep rising, however, a lot more questions will be asked about how mortgage borrowers, those with personal debt, and businesses will cope.

The Bank has always said rates will have to rise one day, but the timing of the next move up is now crucial.

Today's inflation report indicates that another move - most likely to 0.75 per cent - could come in the middle of next year.

How the Bank of England's Inflation Report suggests interest rates will now rise

How fast are rates likely to rise?

If this move represents the Bank starting a rate rise cycle, the most important element is how quickly base rate is now lifted.

The Bank of England Governor Mark Carney has offered many reassurances over the years that when rates rise they will do so gently. Any diversion from that path is likely to spook homeowners, businesses and investors, albeit savers would welcome that.

The new 'normal' for interest rates in this cycle has been judged to be about 2 per cent – that's considerably higher than where base rate is today, but also considerably lower than the long-run average – and a long way below the peaks of the 1980s and early 1990s.

The table above from the Bank of England Inflation Report maps out its expected path for interest rates. The November report sees rates at 0.7 per cent at the end of 2018, compared to a 0.5 per cent expectation in the August report.

It then shows a move up to 1 per cent in 2019 and then rates to stay at about that level through 2020. That's only slightly higher than expected in August.

The key question is whether these forecasts will continue to step up. The Bank says it doesn't think it will need to raise rates faster, but warns that if inflation fails to subside it may have to.

The Bank of England's fan chart shows how it expects inflation to soon peak and then tail off. The darker the red the more likely it sees that scenario

Will inflation tail off?

The inflation that Britain has seen in recent times has been largely driven by shifts in the pound.

We import a lot of goods, food and even essential services such as energy. Petrol prices are also driven by what happens to oil, which is priced in US dollars.

When the pound falls, inflation goes up – and if the pound rises, inflation should go down.

The pound took a big fall against both the US dollar and euro after the Brexit vote, and this ultimately fed through to prices rising for British consumers.

Some of that effect was dampened by retailers trying to limit price rises, or sometimes cover them up by shrinking products, but most of it is now believed to have trickled through.

Inflation is measured on an annual basis, with the cost of a basket of goods now compared to a year ago, and the CPI rise is expected to peak perhaps as early as October, at just above 3 per cent.

Inflation should then tail off and an interest rate rise will bolster the pound and contribute to that.

Interestingly, the immediate reaction to the Bank of England's rate decision today was that the pound dipped slightly against both the dollar and euro. That was because traders were betting on a more hawkish statement from the Bank indicating rates would rise faster. It's important to note that currency markets are volatile and these initial reactions can be swiftly reversed.