The Bank of England voted today to increase the underlying cost of borrowing, raising interest rates to five per cent.

Analysts had widely predicted that the Monetary Policy Committee (MPC) would order such a move, which is the second rate hike of 2006.

Although welcomed by savers, the rise will be greeted more apprehensively by borrowers, with repayments for any purpose loans and bad credit loans among those potentially affected.

However, Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, welcomed the bank's rate rise.

"By acting in a timely manner, the modest rise in interest rates will help to cool the housing market but at the same time promote wider economic stability and prevent inflation pressures building," he said.

Reassuring homeowners, many of whom may hold a homeowner loan, he also reminded them that the housing market comfortably shrugged off August's rate rise.

The MPC ordered the rise in a bid to calm inflation, which at 2.4 per cent remains above the Treasury's target.

Better Lending provides secured loans for people with a poor credit history .