BANK of England governor Mark Carney said that interest rates are likely to rise twice more over the next three years after a week that saw the rates raised for the first time in more than a decade.

Carney said it would be necessary as a means of combatting Brexit fuelled inflation, while many people were left in in doubt over what the current hike in rates means for them and their households.

The decision reverses the emergency cut made in August last year in the wake of the vote to leave the European Union. The base rate rose from 0.25 per cent to 0.5 per cent.

A move in interest rates, however small, will have an immediate impact on household finances.

The decision by The Bank of England will bring higher costs for those with mortgages and other borrowings. Almost four million households will face higher mortgage interest rates as a result of the rise. Simultaneously, the rise could be welcomed by some investors, the UK’s 45 million savers, as well as anyone considering buying an annuity for their pension.

Brokers have said that the scale of the recent rise, the first since 2007, is unlikely to push borrowers beyond the limit of affordability, but those with a variable rate mortgage will suffer most.

Mortgage borrowers on variable rates face higher monthly bills after the base rate rise as lenders are expected to follow suit and raise interest rates on home loans.

People on lenders’ standard variable rates will be most significantly affected short-term. In addition, those with tracker mortgages will be impacted as rates are likely to rise for existing borrowers from December.

As a consequence, brokers estimate that there will be a rise in people signing up to fixed-rate mortgages as well as an increase in demand for longer fixed deals of five years.

The Bank’s move takes borrowers back to the level of payments they faced before the last rate cut in August 2016. But inflation in the following period may make its reversal more painful considering it comes alongside higher costs for food and fuel.

Ben Broadbent, Deputy Governor for Monetary Policy at the Bank of England, voted in favour of the rise citing record lows of unemployment and rising inflation rates as his reasons for supporting the decision.

He agreed that some households who are currently experiencing inflation outpacing their wage growth would experience some financial pain as a result of the rise.

He said: "I think one should keep the scale of this in context. Not all home owners have variable mortgages, and interest payments on debt are lower than they've ever been relative to income."

In terms of pensions, annuity rates are directly linked with movement in interest rates and experts suspect that the hike in base rate will result in higher income for pensioners overall.

Richard Eagling of Moneyfacts, said: “The interest rate rise is good news for those on the verge of retirement who may be looking to secure an income through an annuity, as it is likely to boost gilt yields, which underpin annuity rates.”

Stock prices will not be majorly affected by the rise short term, in spite of the decision to raise the rate in unusual circumstances, amid a low GDP growth.

However, beyond interest rates, political uncertainties remain the central focus for investors in the UK.

The lack of clarity surrounding Brexit and the apparent instability of the UK government is making it more difficult for companies to make investment decisions.

Broadbent agreed that Brexit was weighing on the country's economic performance.

He said: "It is clearly having some effects on the economy. We think investment is weaker than it would otherwise have been. Obviously consumption has been affected significantly by the squeeze on real incomes that results from last year's referendum."