Keep your wits about you now rates have risen

Borrowers and savers should keep a close eye on the rates they are paying or earning following last week's shock rise in the base rate. Although only a few banks and building societies responded to the 0.25 per cent rise to 4.75 per cent, most are expected to raise their rates by the beginning of September. Check rates then, and consider moving if the rate you pay or earn looks uncompetitive.

Mortgage holders without fixed rates on variable rate loans will be stung by higher monthly repayments - a £100,000 variable rate repayment mortgage, payable over 25 years, would have cost £555 a month under the old rate of 4.5 per cent, but monthly mortgage repayments will now be about £570 a month.

James Cotton, mortgage specialist at London and Country Mortgages, says: 'Anyone with a standard variable rate mortgage could get a lower rate.' The average standard variable rate is about 6.5 per cent, and Cotton points out that by switching to a discounted or tracker mortgage you could save more than 2 per cent on interest. For instance, Portman building society is offering a discounted variable rate of 4.29 per cent, with a £499 arrangement fee.

For prospective homebuyers a fixed-rate may feel safer, but variable rates are typically cheaper. Leeds building society has launched a three-year fixed rate mortgage at 4.49 per cent . It is available up to 80 per cent loan to value and allows up to 10 per cent capital repayments each year without penalty. However, the arrangement fee is 2 per cent of however much you borrow, which could mean a hefty initial payout. Alliance and Leicester has also recently announced a two-year fixed rate mortgage at 4.49 per cent, with a £999 arrangement fee.

For savers, the increase has been 'clearly good news', says Ketan Malde, financial director of Heritable Bank. 'Those with variable-rate accounts will benefit now from increased interest, though those seeking new fixed rates have already begun to benefit as the money markets had already factored in today's rise in the base rate.'

National Savings and Investments was the first to announce that it had increased its rates with immediate effect, following the announcement on Thursday. Its Direct Isa is now paying 5.3 per cent interest, rising from 5.05 per cent.

Marks and Spencer Money has similarly increased its cash Isa rate, from 4.50 to 4.75 per cent. The rate rise will apply to the M&S mini cash Isa, Tessa-only Isa and the £3,000 cash component of the M&S maxi. The Post Office has improved rates on its Instant Saver account, which now offers 5.05 per cent interest compared to 4.75 before the rate rise.

At the time of writing, most providers were still reassessing their interest rates. It is widely anticipated that more will be changing them on saving accounts and mortgages in the coming weeks. Check out Moneysupermarket.com and Moneyfacts.co.uk.