The decision was supported by a 7-2 majority, with members having preferred to maintain rate at 4.5%.

The rate hike is a response to high inflation which, according to the recent figures, remained at 8.7% throughout May after it fell from 10.1% in March to 8.7% in April.

The increase in the will particularly impact the housing market. With 15% of mortgage holders being tied to variable rates, the increase will primarily affect a smaller group of homeowners, compared to 70% 20 years ago.

The impact will unfold gradually for those with fixed-rate mortgages, creating uncertainty and potentially leading to higher interest rates than needed.

Susan Love

Susan Love, strategic engagement lead, ACCA Scotland, said: “While another interest increase seems quite a shock, it was always on the cards given the high rate of inflation. You can really understand why many Scottish business and consumers, even when holding cash are pulling back from investment currently.

“The increasing interest rates will have a big impact for many consumers. And the business sector should not be forgotten either. This is starting to look a grim day for businesses who have really struggled over the last couple of years. Small businesses in particular are going to have to manage their cost base and their working capital with great care.

Jonathan Ashworth, ACCA’s chief economist, added: “The Monetary Policy Committee surprised market expectations by voting for a larger than expected 50 basis points rate hike.

“Seven of the nine members supported the decision, noting that the stronger than expected wage and services inflation data suggested that there was more persistence in the inflation process.

“Key focus over coming months will be on developments in the labour market and with inflation, but the risk clearly lies in the direction of additional policy tightening.”

Kevin Brown, savings specialist at Scottish Friendly, commented: “It’s probably the least surprising rate hike of the past two years, even coming higher at 50 basis points. Inflation is proving extraordinarily stubborn. We now have a twin crisis of prices continuing to rise, while pressure in the form of higher debt costs is being passed on to households.

Kevin Brown

“Where does the MPC go from here? To keep chopping and changing its decisions, as has been done today, will give the game away that it has lost control of the process. This is probably going to ultimately lead to interest rates being higher than they need to in the long term and doing more damage to the economy than necessary.

“Households will feel ever more pain in the battle against inflation and rate rises are just going to heighten that. Savings rates on the other hand remain pitiful, leaving anyone still able to save with unenviable choices. Anyone looking to save should consider where else might be better, as savings still don’t keep up with stubbornly high inflation.”

FSB national chair Martin McTague said: “The Bank of England (BoE) is risking economic slowdown across our small business community, with a jarring 0.5% increase in interest rates. We are standing at a crossroads. Inflation and interest rates are unrelenting.

“An increase in interest rates comes as no surprise – it’s a tried-and-trusted lever to pull in such times – but the size of the increase will hurt, and rate rises are not a magic wand in reducing inflation. This was driven by the highest core CPI rate in 30 years, but it has significant repercussions for everyone, not least for the 1.5 million on variable mortgages.

“While higher interest rates are a tool to control inflation, the weight of escalating costs means consumers have less disposable income to circulate in the economy. When the money in their pockets is worth less, the upshot is reduced sales for businesses.”