The Bank of England has increased interest rates for May. The official Bank Rate paid on commercial bank reserves will rise for the second time this year to 5.5%, their highest level since April 2001.

The increase in interest rates was widely expected by forecasters after it was revealed last month that inflation was running at record levels; the only real debate was how high the Bank would decide to increase rates. The Bank of England has been criticised by some sections of the economic community for failing to raise interest rates sooner to curb inflation. (Read more: Bank Criticised Over Inflation).

“There may have been some debate over whether a half per cent rate rise would be enough to do the trick and some of those around the table may have pushed for a 0.5 per cent increase,” says Trevor Williams, chief economist at Lloyds TSB Corporate Markets.

“However, in the end the MPC seems to have sensibly decided that 0.25 per cent is enough for the time being, given that inflation is expected to start falling back to its two per cent target by the end of the year.”

Williams added that while double digit house price rises and brisk economic growth were undoubtedly considerations in the MPC’s decision, if anything sealed the fate of interest rates, it was Mervyn King's letter to the Chancellor in April. “The news that inflation had strayed more than one per cent beyond its target made a rate hike inevitable.”

Mform.co.uk, the mortgage company, predict that more than one in seven people could struggle as a result of the Bank of England’s decision to increase interest rates by 0.25 per cent.

“Borrowers have got used to low interest rates and many haven’t adjusted to the fact that we may now be entering a period of higher rates,” commented Eamonn Rice, mform.co.uk Chief Executive. “Anyone who hasn’t acted in the face of four Bank of England rises since last August should start now.”

More expert comment and analysis to follow

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