'˜Something has to be done to steady the ship'

Head of policy and representation Mark Baulch said: ‘Inflation is at a five-year high and outstripping wages, so this modest quarter-per cent rise in interest rates, albeit significant as it is the first hike in 10 years, is a sensible, pragmatic step.

‘Household debt is rising five times faster than earnings and with such a precarious debt position, something has had to be done to steady the ship, encourage savers and discourage borrowers.

‘The actual impact will be fairly muted for most companies and individuals.

‘It will be concentrated mainly on those people paying off variable rate mortgages, with no spectacular windfalls for savers, but the message is clear that consumers and businesses cannot be complacent about debt for ever.

‘Going forward, we are unlikely to see interest rates going back up to levels of five per cent and above during the next decade. Instead any further rises are likely to be incremental and in line with the ever-changing economic context.’