The Bank of England's decided to raise the base rate of interest from 0.25% to 0.5%.
Businesses had braced themselves for an increase in interest rates – with experts correctly predicting it could be good for some and bad for others.
It's good news for savers - who haven't seen much of a return with numbers so low.
But it's not so good for borrowers on variable rate deals - and it will add around £15 per month to the cost of the average mortgage.
The move follows repeated warnings from Bank Governor Mark Carney that interest rates may need to be hiked to help manage rising, Brexit-fuelled inflation, which hit 3% last month.
For some experts a rise will be felt more keenly by struggling businesses, while for those going strong it could provide a welcome boost – and demonstrate that the UK economy is recovering in the wake of the financial crisis a decade ago and the continued uncertainty over the impact of leaving the EU.
Andrew Hill, Head of Corporate at Baines Wilson, said that a move to increase interest rates may not be welcome, but is necessary.
He said: “Although not good news for borrowers or for businesses that may already be struggling to deal with an increasing minimum wage, higher fuel prices and increased import costs due to the weak pound, the initial rise is expected to have only a modest impact on most households.
“Inflation needs to be kept in check and despite the increase rates will still be at a far lower level than historically.”
Martin Ward, Partner at chartered accountants and business advisers Dodd & Co said: “Increasing interest rates hopefully means that there are now real signs that the economy is recovering and doesn’t require the stimulus of artificially low interest rates. Whilst increased rates may cause many 'zombie' companies to fall over that should provide opportunities for stronger businesses to move forward."
But he warned the impact on the general public – in particular increases for those with variable rate mortgages – may have a knock-on effect for businesses too.
He continued: “Unfortunately, increased interest rates may well cause the general public to have to rein in their expenditure on consumer goods in order to pay interest on their borrowings, and that is likely to cause more angst to the retail trade.”
Managing Partner of Armstrong Watson Paul Dickson, said a rise, along with the current economic climate, made it a good time for businesses to develop their strategies, review their interest rates and look for alternative funding.
He pointed to record levels of Individual Voluntary Arrangements and a 10% increase in the number of insolvencies as an indication that more businesses were experiencing financial difficulties.
He said: “We are seeing that some businesses are telling us that there is a lack of confidence in certain areas which they believe are impacting on their sales. My concern is that many businesses are managing with low interest rates but some could find it difficult if interest rates increase to service the additional cost of their debt.”
And Peter Stafford, Managing Director of law firm Cartmell Shepherd believes any rise would be modest.
He said: “Having said that a small increase will add to household costs and those struggling or those with mortgages that are not tied in would be wise to look around and see what deals there are. The same applies to any commercial mortgage or loan. Getting advice at this stage may well produce considerable savings in the long run.”
On a more positive note, the rise will be welcomed by savers, who have been held back by the rock bottom interest rates of recent years.
While any increase in savings will be modest, set against the £200 or so increase in a variable standard mortgage of £100,000 and predictions that any benefit will erode over time as wage rises fail to keep up pace, they could provide welcome relief for those on the verge of retirement.
“With increased life expectancy and rising inflation people have rightly been worried about their long-term retirement income prospects so I am sure they will welcome the rise,” added Nathan Glaister, Director, Dodd Wealthcare.
Speculation has already begun around a further increase – with some economists anticipating it could be early 2018 if the economy remains stable.