What does the the rise in interest rates mean?

The question now is does this signal the start of a rate hiking sequence like the one the US has embarked upon?

Alternatively, is it just a one off adjustment – a so-called one and done?

The tone of the accompanying statement suggested the base rate would most likely rise slowly and gradually from here.

The prospect of this interest rate hike has been building steadily since September such that it would now have been a bigger surprise if it had not taken place.

The market therefore only needs to react to the comments Mark Carney made at the press conference.

While these might have been a little more tilted towards further rate hikes than some expected, it remains the case that the market only expects interest rates to reach one per cent within the next two years.

The accompanying statement said rates would rise in line with current market expectations, which are that the base rate will hit one per cent by the end of 2020.

That means there will be only two more quarter-point rate increases by then, although the statement stressed this was subject to revision as the economy moves through the difficult Brexit transition period.

This movement in interest rates had been anticipated so it will have little immediate impact.

It is a positive for banks and general insurance companies, which will benefit from higher rates received on reserves and short-term investments respectively.

Generally higher interest rates make shares less attractive, but the difference between stocks yielding three to four per cent and cash at just 0.5 per cent remains historically very wide.

Investors are faced with the dilemma between saving in a way that provides an expected return that is comfortably above or far below current or forecast rates of inflation.

Interest rates can affect the pound as well.

The recent anticipation of this rate hike has been good for the pound, which has helped companies that buy goods and materials from overseas to sell in the UK.

This includes lots of retailers.

Conversely companies that sell most of their goods overseas have suffered.

However, the pound fell after the announcement because of the suggestion by the Bank that rates will only rise very gradually.

The real impact on borrowers will be limited.

Holders of repayment tracker mortgages will see modest increases.

Generally the rates available on fixed rate mortgages have dropped below those available on trackers, leading consumers to shift overwhelmingly into fixed rate loans.

That means it won’t affect too many consumers very severely.

The Bank of England monitors effective interest rates (the rates which consumers are charged).

In 2010, the effective five-year fixed rate mortgage cost 5.7 per cent.

It has declined steadily since then and last month reached just 1.9 per cent.

This has provided a boost to the disposable incomes of consumers who could remortgage to take advantage of the lower rates.

This has obviously also helped people to buy houses.

Now it seems likely that such mortgage rates may be reaching their nadir.

Added to which the loss of momentum for house prices nationally, and more specifically house price falls in London, mean UK consumers may feel poorer or have less recourse to borrowing against their homes than they did in the past.

Generally, the economy is in mixed shape.

Consumption has held up reasonably well considering that consumer prices have been rising faster than wages since the Brexit vote.

Despite uncertainty over future trading conditions, the manufacturing sector continues to benefit from better economic performance in our principal export market, Europe, aided by the weaker pound.

Construction activity has, however, been very weak, suggesting an unwillingness of companies to make further investment while uncertainty lingers.

We have seen a slight and unexpected improvement in an important gauge of construction activity, but it was driven by housebuilding, rather than commercial investment.

Neil McLoram works in business development at wealth management firm Brewin Dolphin, based in Newcastle.

The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin. No director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change. The value of investments can fall and you may get back less than you invested. The information is for illustrative purposes only and is not intended as investment advice.